According to the Federal Reserve Bank of New York, student loan debt in the United States reached a staggering $1.51 trillion in 2020. This crisis, coupled with the economic impact of the pandemic, is cause for immediate action against the ongoing increase in U.S. student loan debt.
President Joe Biden’s recent transition into office raised concerns for his plan to tackle the national student loan crisis. The U.S. government spent far too long ignoring this issue. Biden needs to propose a plan sooner rather than later.
Student loan borrowers spend years paying off loans. In a 2019 poll from New York Life, participants reported it took an average of 18.5 years to completely pay off their student loans. These educational expenses follow borrowers for a significant period of adulthood and impact every financial milestone.
Monthly student loan payments have too much control over borrowers’ lives. These costly payments often stand in the way of home ownership and other potential investments. Citizens should not be financially punished for pursuing higher education.
People are already pushing to hear Biden’s plan because student loan debt is at an all-time high. Additionally, many middle-skill jobs that required no more than a high school diploma now insist that applicants have a bachelor’s degree or higher, according to a study by Harvard Business School, Accenture and Grads of Life.
In a CNBC article, chief economist at Georgetown University Center on Education and the Workforce, Nicole Smith, spoke on the ongoing crisis. Smith explained student loan debt is now an urgent and widespread issue, in contrast to past years. Higher education costs were far more practical in the past.
“People who went to school in the ’70s and the ’60s, they actually paid for college while working,” Smith said. “They would take a summer job and they would pay their tuition. And by the time they graduated, they would be debt-free or just, a couple hundred dollars, a couple thousand dollars to get by, they pay that off in a couple of years and move on with their lives.”
What Smith described is almost unheard of today. In fact, a University of South Carolina study found the price of higher education in the U.S. increased by 250% in the past three decades, taking inflation into account. As a result, student loan borrowing increased over the years and debt skyrocketed.
Sadly, today’s loan borrowers cannot take the ’70s summer job approach to funding their education.
With new administration in office, U.S. citizens are demanding to hear Biden’s plan.
These demands are justified. Our government has shown little to no interest in addressing the student loan crisis in previous years. With financial burdens brought on by the pandemic, people need solutions now more than ever.
According to CNBC, Biden plans to ask Congress to cancel $10,000 of all borrowers’ student loan debt as part of the next pandemic aid package. This package would also include an extension of the previously implemented pause on monthly payments.
These proposals are a step in the right direction as they offer temporary solutions to a more urgent issue. However, we need a plan that addresses the past, present and future of student loan debt in the U.S.
Miguel Cardona, U.S. Department of Education secretary nominee, provided a glimpse of hope when speaking on the possibility of student loan forgiveness.
According to CBS News, Cardona spoke in support of a student debt relief plan during an interview with Connecticut Public Radio.
“College is the pathway to continued success, and we have to make sure that our students still have access to it and that they’re supported in this process,” Cardona said.
While both Cardona and Biden’s ideas for the future sound promising, the U.S. still lacks a formal plan to address student debt. In order to address the issue, our government needs to determine the causes of the student loan crisis.
A Harvard Business Review article suggests the incredibly high cost of higher education is the primary reason for the steady increase in student debt. This is certainly an area of concern.
Biden’s eventual long-term plan will likely need to tackle the source of the problem first. Simply put, higher education needs to be more affordable. We should not have to take out thousands of dollars in loans to receive an education.
The Biden administration will need to draft a plan that reverses the damages of that 250% price increase. Unfortunately, this will be a difficult feat and likely a lengthier process than most anticipate. It will take years to undo the $1.51 trillion crisis.
However, the issue needs to be addressed no matter how difficult. Officials cannot procrastinate student loan relief any further. A degree should expand financial freedom, not destroy it.