How Student Loan Debt Became a Crisis

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President Biden is under increasing pressure to resolve the student debt crisis, with lawmakers urging him to grant a blanket forgiveness. However, outstanding debt is only part of the problem as soaring tuition fees and a growing availability of federal loans continue to fuel the crisis.

So far, the student debt crisis has resulted in 43 million borrowers collectively owing about $1.6 trillion. Some of the main drivers of this growing debt are rising tuition fees and the increased availability of federal loans, further exacerbated by corresponding wage stagnation.

Tuition fees are a crisis in themselves, something former Secretary of Education William J. Bennett foresaw decades ago in 1987. Bennett argued in a opinion piece“Increased financial aid in recent years has allowed colleges and universities to blithely raise tuition fees in the belief that federal grants on loans would help cushion the increase.”

Already, a pandemic-related student loan repayment freeze starting in March 2020 has now been extended five times in two jurisdictions, and lawmakers are asking the president to further extend the moratorium that will expire on May 1. lawmakers have also argued that not extending the hiatus is a risky maneuver in a year of midterm elections.

Rep. Pramila Jayapal (D-WA) recently called on the president to forgive up to $50,000 in loans per borrower as food and gas costs rise amid Russia’s invasion of Ukraine, but Jayapal upped the ante on Sunday by urging Biden to call it all off. student debt.

“Extending the payment pause is simply not enough,” Jayapal wrote on Twitter. “We must cancel every penny of student debt, once and for all.”


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Tackling the current debt stock can ease the financial burden of millions of borrowers, freeing up income to buy a car or invest in a home. However, this decision would not prevent future borrowers from entering the same debt crisis.

Collective student debt has increased by 144% over a 13-year period, from 2007 to 2020, from $642 billion to $1.566 billion, according to a 2020 report published by the Bipartisan Policy Center (BPC). During the same period, the number of borrowers increased from 28 million to 43 million. The report links the two issues in part to rising unemployment caused by the Great Recession beginning in 2007.

The recession prompted policy changes, including an expansion of the federal direct lending program. Prior to the overhaul, most federal loans were handled by private lenders, with the federal government footing the bill in the event of default. But Congress expanded the program in 2010, allowing the government to issue all federal loans using Treasury Department funds.

The move proved monumental, as it increased access to student loans, creating a “vicious circle of rising tuition fees and debt,” BPC explained. With more students gaining access to funding, colleges and universities could start charging higher tuition fees without any major drop in enrollment. Published tuition rates at colleges and universities have increased by 60 cents for every dollar of increase in the annual loan limit for federal direct subsidized loans.

The change had near immediate effects, with the BPC report noting that federal student debt rose to 6.6% of US gross domestic product (GDP) in 2015 from just 3.5% in 2007.

Meanwhile, the cost of a college education has doubled over the past two decades and is rising 6.8% each year. according to The Education Data Initiative. Data shows that the average cost to attend a public school in the state for one year is $25,487. Students attending private schools pay nearly twice the average cost for a year, or about $53,217. The two figures cover tuition, fees, and additional expenses.

Yet the price of college has far exceeded the corresponding salary increase by more than 100% over the past four decades, according to education data analysis by Georgetown University last fall. Between 1980 and 2019, tuition fees increased by 169%, while wages for young workers aged 22 to 27 increased by 19% over the same period.

Sen. Elizabeth Warren (D-Mass.) brought the issue to the forefront on social media earlier this week, again calling on the president to write off student debt, an issue he has previously expressed a willingness to address. both early in his presidency and on the campaign trail.

“I graduated from a public school that costs $50 per semester,” Warren wrote on Twitter. “Every person in America should be able to go to college without being crushed by student debt.”


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