By 2023, 40% of student loan borrowers are expected to be in default according to the Brookings Institute. With billions of dollars in tax cuts for the wealthy passed last year, and murmurs of a second round of similar legislation to be expected this fall, it’s time we address the biggest economic issue of our generation. Student loan debt is crippling millions of Americans, and it won’t be going away any time soon without the intervention of Congress.
In the first quarter of 2008, student loan debt totaled $579 billion. By mid-May of this year, it reached $1.5 trillion, passing credit card and auto debt by tripling over the last 10 years. Still, student loan debt it second only to housing debt, so why is it the most dangerous form of debt to our economy?
By far, the federal student loan debt is the hardest to get rid of, and the Education Department has done very little to regulate private lenders. While filing for bankruptcy due to credit card debt, medical expenses, or unemployment is still a feasible option for most citizens who need it, it is nearly impossible to find relief from the Education Department when one is unable to afford student loan payments. This is due in part to Congress’s reversal of the 1978 Bankruptcy Reform Act in 1990. Since then, discharging federal student loan debt has been nearly impossible. Unlike in the private sector, where loan servicers frequently weigh the cost of litigation and the amount of money they’re likely to get from borrowers, the Education Department began fighting all bankruptcy discharges. And while disallowing a bankruptcy on the part of our citizens who borrowed money to go to school, to improve their lives and to increase what they can give back to the country, private companies who loaned them the money can declare bankruptcy all day long. Every day. Why do our laws protect companies in a more beneficial pattern than the people. Let me reiterate with a question: Why do corporations receive preferential treatment in this particular situation over citizens?
Secondly, the recent absorption of the Consumer Financial Protection Bureau’s student loan division into the consumer information unit will only exacerbate the issue. Career officials fear the change will make the former division’s efforts at reigning in wayward student loan collectors more difficult. Navient, a lender accused of “steering low-income borrowers into higher payments than they needed to make, misallocating payments and failing to provide customers with clear information about cost-saving options,” services over 12 million borrowers.
Jerome Powell, the Trump-appointed Federal Reserve Chairman, believes that student loan debt should be discharged in bankruptcy, and places the burden of making it possible on Congress. In addition, he stated that the unchecked growth of student loan debt has the potential to “hold back growth.” With the effects of the subprime mortgage crisis still in living memory, it is a wonder that this Republican-controlled Congress hasn’t tackled this issue yet.
From the cradle, Americans are encouraged to continue their education through to college, with little emphasis put on the economic practicality of such a venture. This has been done in part because of the value placed on higher education for social and economic upward mobility, as well as the growing number of high school graduates making the diploma less valued. In 1950, about one-third of Americans over 25 had graduated high school. In 2000, that number was 80%.
Today, a Bachelor’s degree will hardly earn a graduate more than it would in 1960, yet it’s costing the average student more and more to attain. From 2005 to now, the average debt accrued while pursuing a four-year degree has increased by $20,000 and is currently at $37,172. This number is on course to continue increasing exponentially, and while some Republicans and Democrats both agree that it is a serious problem facing our country, few concrete steps have been taken yet to properly address it. This November, by electing candidates that address student loan debt explicitly in their platforms, voters can change that.
