Student Loan Debt: It's not that bad, Right?

Student loan debt is the hot topic for college students and graduates. Are folks exaggerating and how bad is it, really? Students and families borrow about $100 billion annually for college-related expenses. In comparison to about 25 years ago, student borrowing for college was $30 billion annually. Today, the national student loan debt is over $1.7 trillion. To put this amount in context, the U.S.' student loan debt has now surpassed the total GDP (gross domestic product) of Canada at $1.6 trillion, Brazil at $1.4 trillion and Australia $1.3 trillion, according to World Bank data. These are not small or underdeveloped countries and regardless, $1.7 trillion is a ridiculous amount of money to owe back. (Side note: The number one debt source in America is mortgage loans, at about $10 trillion).

Unfortunately, for college goers and their families, college costs increases twice as fast as inflation and has risen approximately 500% since 1985, as reported in a recent Forbes article. College tuition rates consistently increase 3% per year. States continuously allocate less and less funds for higher education. Pre-pandemic and certainly now, colleges are facing serious scrutiny of rising college costs, degree worth and high student loan debt. At onset of the pandemic, traditional brick and mortar institutions were forced to deliver online courses. But academic quality was certainly called into question due to the course delivery adjustment. Some schools offered a tuition discount while others did not, begging students and their parents to question, "what are we really paying for?".

College-bound and current students go to college to increase their career-prospects and options"to make more money" than they would with a high school diploma. Of course other reasons include, parental stipulations, societal expectations, etc. But the main reason has something to do with an investment in themselves, i.e., economic progression. Okay, so who cares and why is this important? Economists and advocates claim that college student debt negatively impacts our economy. Student-loan debt may result in the delay or challenges with achieving certain life milestones including the delay of home buying, delays in childbirth, poor credit, and effectively stifles economic mobility. The point here is that student-loan debt exacerbates generational and wealth inequality.

Forgiveness & Relief

The Department of Education, under the Biden Administration has already forgiven $11.5 billion in student loan debt for individuals with permanent disabilities, former ITT Tech students, former trade school students and students who were defrauded by certain institutions (read: for-profit schools). Federal student loan repayment is on hold until January 31, 2022. The Department of Education states that this will be the last delay. Additionally, new changes for the Public Service Loan Forgiveness program were announced to ensure more student-loan borrowers are eligible for the program.

The Bottom Line

The average student-loan debt is approaching $37,000, nationally. In other words, students leave college with about $37,000 in student loans. Unfortunately, the average student-loan debt is much higher for students who attend private institutions. Side note: I'm only talking about undergraduate students. Graduate and professional student-loan debt is for another day (yes, approaching six figure debt - but click here if you're curious).

How can we expect young professionals start their life with a lovely almost $40k bill? How can we expect an actual economic contribution for those who must take out a loan to complete their studies? Do we tell them to keep working hard or harder to make it? Do we tell them to add on another degree for $50k to make them more marketable for a better job with a higher salary? And yes, you know where I am going here..What about our most vulnerable students? Yes, our beloved historically excluded groups..the Blacks and the Browns. Students of color are disproportionately affected by the student-loan debt crisis. The ones with the most to lose are coming out with a ball and chain. This not so subtle crisis is literally laying the foundation for a weak economy.

Although I claim to be an optimist, I must admit that the student-loan debt crisis is a crisis indeed and the outlook is bleak. I do not have the answers nor can I conceive of a reasonable solution. I am not confident that relief is on the way. Apparently, neither can the Biden Administration and our friends over at the Department of Education. What I do know is that something needs to be done. So while the folks in Washington try to figure this out, the best that I can do is inform prospective and current students to consider other options as much as possible. Take out only what you need and not a penny more. Seek scholarships, grants and if you can, start planning for college as early as possible.