How to fix the student debt crisis for good

·Senior Editor
·7 min read

“The 360” shows you diverse perspectives on the day’s top stories and debates.

What’s happening

Last week’s executive order from President Biden calling for forgiveness of as much as $20,000 in debt for certain student loan borrowers has sparked an ongoing debate about the economic implications, political impact and fairness of the policy.

For all of the controversy over Biden’s decision, though, there’s one thing all sides agree upon: Erasing student loans balances won’t do anything to address the rising costs of higher education that caused all of that debt to pile up in the first place.

Over the past several decades the cost of attending college in the U.S. has skyrocketed. At the same time, average wages have stagnated, causing more and more students — and their families — to take on hefty loan balances in order to afford an education. In 1995, Americans held a total of $187 billion in federal student loan debt. By this year, that number had ballooned to $1.6 trillion. Today, the typical undergraduate student has about $25,000 in loan debt by the time they graduate, according to the Department of Education.

Biden’s order could eliminate as much as $500 billion in student debt. But without major changes to the underlying causes, it may take only a few years for the total debt burden to climb back to where it was before the cancellation plan was put into effect, according to analysis from the Committee for a Responsible Federal Budget.

As crippling as college debt can be to individual borrowers, research suggests it also has society-wide affects. Studies have found that student debt can cause borrowers to delay major life events like having children or buying a house, stunt the country’s economic growth and worsen racial wealth disparities. High costs may also be contributing to an ongoing decline in college enrollment, a trend that, if it continues, could threaten the stability of some universities.

Why there’s debate

While most experts agree on the causes of the student debt crisis, there’s very little consensus on solutions.

Many left-leaning advocates say the government must take a much more proactive role in making college more affordable. Proposals to achieve that include significantly increasing the size and scope of assistance programs like the Pell Grant, restructuring student loans so they’re easier to pay off, increased scrutiny of universities’ spending and even government-imposed price controls on tuition. Some progressives go further, arguing that the college should be free for all students.

A lot of conservatives, on the other hand, make the case that government intervention in higher education only fuels bloated and inefficient university budgets. In their view, easy access to student loans has allowed schools to ratchet up tuition and other expenses without worrying about graduates’ ability to pay off the debt. They say that dramatically shrinking the federal student loan program will create space for the free market to push costs down over time.

There’s also debate about how much responsibility universities should have to ensure that their graduates aren’t overburdened by debt. Some proposals call for penalties to be placed on colleges that give out expensive degrees that don’t result in higher-paying career paths. Other plans would have universities carry some or all of the financial risk of issuing loans.

What’s next

Biden’s efforts to relieve student debt don’t stop with loan forgiveness. His order extends the pandemic-era pause on payments and interest until the end of the year; it also restructures income-based repayment plans so some low-income borrowers will have to pay less every month. The president said he will continue to advocate for Congress to pass legislation that would enact two of his core higher education proposals: Doubling the size of the Pell Grant and making community college free.

Perspectives

The government should take charge on how much a college education costs

“Much like the medical system, higher education is badly in need of price regulation. For decades now, the government has been shoveling subsidies into colleges and universities, and (with a few exceptions) they have responded by jacking their prices through the roof. Biden can’t do this by himself, of course, but it’s long since time for the government to start demanding a better deal for itself — and American students.” — Ryan Cooper, American Prospect

The government shouldn’t have a role in handing out student loans

“There are structural incentives that push students to borrow money that they can never hope to pay back, and the fact that so many people have fallen into crippling debt is a compelling reason to change these incentives. No rule says the federal government must lure people down a path that leads to financial ruin with some frequency. Congress can sharply limit, or even end, this practice.” — Robby Soave, Reason

College should be free

“Making higher education available through personal debt was a failure that exacerbated inequalities and made it impossible for the system to serve as an engine of equality. Now that the error has been acknowledged, it’s time to make higher education a true public good with free-college legislation.” — Suzanne Kahn, The Nation

Simple changes could make student loans much more manageable

“Lowering the interest rate on student loans … would cut into the number of people who make their monthly payments, only to find themselves falling further and further behind. Permitting financially overwhelmed borrowers to seek relief in bankruptcy court short of “extreme hardship” would help too.” — Helaine Olen, Washington Post

Fixing the college debt crisis starts with recognizing higher education as a public good

“Many Americans no longer seem willing to acknowledge that everyone benefits when more people go to college. The nation has abandoned a commitment to higher education as a public good that confers personal benefits.” — Jamie Merisotis, Inside Higher Ed

More must be done to help offset the non-tuition costs of attending college

“Even making college tuition free will not prevent students from accumulating debt moving forward. To prevent future student debt burdens, the Biden administration and Congress must craft federal policy that will reduce the living expenses students most struggle to afford: housing, food, transportation and childcare.” — Chris Geary, The Hill

Much more scrutiny should be put on how colleges spend their money

“Higher education, given its importance to raising the income of working families and the direction of the job market, should be viewed as social infrastructure. … That’s why its costs should be subject to the kind of close scrutiny that government applies to public utilities.” — LZ Granderson, Los Angeles Times

Pressure must be put on colleges to ensure they’re offering an education worth the expense

“We must reframe the question. Rather than ask, ‘Why is higher education so expensive, saddling students with debt?,’ we should ask, ‘Is higher education doing enough for students and society to get the best bang for the buck?’ Answering this question will not only lead to increasing the value of a degree for students, but improve the coveted prestige that schools desperately chase in rankings.” — Avery M.D. Davis, Hechinger Report

There should be real penalties for universities that produce high numbers of debt-burdened graduates

“The main problem is that these institutions of higher learning have gone unchecked on tuition prices. Only until colleges are held accountable for what is essentially price-gouging on tuition will the student loan debt crisis truly be fixed.” — Christopher Tremoglie, Washington Examiner

Myths about the magic of the college experience need to die

“Understanding the true nature of the college market should reduce some kinds of student stress. If you’re a high school graduate in reasonable academic standing, there are scores of good colleges ready to admit you. … Nobody is really judging your worthiness for financial aid. College is just another service with a price.” — Kevin Carey, Slate

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