$1.5 trillion
Approximately 43 million adult Americans, roughly one-sixth of the U.S. population older than age 18—currently carry a federal student loan and owe $1.5 trillion in federal student loan debt, plus an estimated $119 billion in student loans from private sources.
How student debt became a $1.5 trillion crisis
Roughly some 44 million Americans collectively hold over $1.5 trillion in student debt. and these numbers are growing with a great pace. At the same time, advancements in technology, especially automation, are making it harder to earn a living wage without some type of advanced degree. Today, college graduates earn 80% more than those with just a high school diploma.
Furthermore, College is more expensive and important than ever before and that dichotomy puts students in a difficult situation. Do they risk going into debt they can’t pay back or miss out on the benefits of a college degree? Experts have long labelled this dynamic a “crisis.”
Moreover, In February, the United States officially entered an economic recession and between mid-march and June, over 42.6 million Americans filed for unemployment. During the 2008 recession, many opted to go back to school and gain new skills. However, since then, the cost of a four-year college degree increased by 25% and student debt increased by 107% and many are less sure if college will be the solution to riding out a recession this time around.
CNBC Make It spoke with students, borrowers, historians and experts to learn how student debt became a crisis, how the pandemic will impact borrowers and who is to blame for putting students in an impossible position.
Some mind-blowing facts that show crisis in America
1. College tuition has more than doubled since the 1980s.
According to a survey, from the late 1980s to 2018, the cost of an undergraduate degree increased by 213% at public schools and 129% at private schools, adjusting for inflation, according to Student Loan Hero, citing stats from The College Board. During that time frame, tuition rose from $3,190 to $9,970 annually for public schools and from $15,160 to $34,740 for private schools.
2. Three million senior citizens in the US are still paying off their student loans.
Moreover, young people aren’t the only ones paying off their debt. More than 3 million Americans aged 60 and older owe more than $86 billion in unpaid student loans, reported INSIDER’s Kelly McLaughlin, citing Consumer Financial Protection Bureau (CFPB) data seen by CBS News.
3. As of May 2018, 101 people in the US owe at least $1 million each in student loans, according to The Wall Street Journal, citing the Education Department.
Costs for professional degrees are rising, too. Five years ago, only 14 people in the US owed $1 million or more each on their federal student loans, The Wall Street Journal reported, citing the Education Department. As of 2018, that count had increased to 101 people.
Also, the Interest rates for graduate students have increased by more than 6% from 2004 to 2012, according to The Journal.
4. As many as 40% of borrowers could default on their student loans by 2023.
According to a report from the Brookings Institution followed students who were paying loans up to 20 years after graduation. The report found that the rate at which people default on their loans continues to rise between 12 and 20 years after graduation. By analyzing the rate of default 20 years after graduation for those who started college in the years 1995 and 2003, the report predicted that nearly 40% of borrowers could default on their loans by 2023.
The situation is serious, no doubt. Will this educational debt be completely removed at some point of time?
POSSIBLE SOULTIONS
Although many solutions have been discussed to payoff/layoff this debt but no concrete solution has been applied so far. Some of the solutions are:
1. The Student Loan Fairness Act, (sponsored by Sen. Elizabeth Warren)
• The Student Loan Fairness act would offer borrowers the 10/10 loan repayment plan, which limits the payment on student loans to 10% of discretionary income. Though this is already currently offered with the Income Based Repayment, one of the big differences is that the proposed 10/10 repayment also offers a maximum capitalization of 10% of interest over the loan that was taken out. This means that your loan balance will never surpass your original balance plus 10%.
• The Student Loan Fairness Act would allow borrowers a year in which they would be able to convert their private student loans into federal loans if they qualify. Even if you do not qualify for the conversion, the mere fact that this option exists will force private lenders to work with their borrowers and offer programs to parallel what is offered in federal programs.
• The Student Loan Fairness Act offers forgiveness to public sector employees after only 60 months.
2. “Free College”
Sen. Bernie Sanders was first with a proposal to make college free. The key elements are:
- Free tuition at public colleges and universities
- Eliminate federal government’s profiting on student loans
- Cut interest on student loans
- Allow students to refinance loans at today’s interest rates
- Allow low-income students to use financial aid to cover room, board, books and living expenses
There is one more solution apart from above which is being provided by Freeeducation staffing . This is a non-profit staffing/recruitment organization with a mission to contribute profit towards US education debt and has a vision to remove entire 1.5 trillion debt in next 8-10 years.