Student loan debt has been a point of contention since the early 2010s. It endured through the Obama administration, then the Trump administration, and is a continuity under the current Biden administration. At the height of the COVID-19 pandemic, with record high unemployment rates, many people worried about how they would procure the money to pay for everything.
When President Joe Biden ran for office in 2020, his campaign promised to address the student loan debt crisis. The student loan amount currently stands at a staggering $1.77 trillion. While Biden has proposed several initiatives, including canceling a portion of student loan debt as well as reforming the repayment system, the lack of actions leaves borrowers still wishing for reprieve, and others questioning how we got here.
One of the largest contributors to the current student loan debt crisis is the rise in college tuition. Over the past few decades, tuition and fees at public and private universities have skyrocketed. The average cost of tuition and fees at a public four-year institution for in-state students is $11,260 for the 2023 – 2024 school year, a 2.5% increase from 2022 – 2023. However, the Pell Grant, money students don’t have to pay back, has declined by 33% since the 2012-2013 school year. This lack of deferred aid is most likely a cause of future problems for current students. The inverse relationship between tuition costs and less grants is likely to add to the already accumulating debt crisis.
Economic downturns, such as the 2008 recession and the COVID-19 pandemic have also exacerbated the student loan debt crisis. Plagued by limited job opportunities and high unemployment rates, recent graduates are struggling more than ever to find jobs and repay their loans. While the CARES Act temporarily suspended federal student loan payments providing relief for borrowers throughout the pandemic, these did not account for the long term questions of what happens when the pause ends. With student loans payments having resumed in October 2023, borrowers are once again facing the problems about loan payments.
It is clear the crisis requires a comprehensive approach that includes multiple measures of curbing tuition inflation, reforming federal loan policies, and providing support for borrowers facing financial problems.
Currently, the Biden-Harris administration is attempting to pass the SAVE plan to cut undergraduate loan payments. The SAVE plan aims to relieve borrowers of up to $20,000 on their loans. It is also targeted to low and middle income families. Additionally, in their draft, the Biden Administration outlines new rules to make payments more manageable for borrowers. Some rules include limiting loan payments to 5% of the discretionary income, raising non-discretionary income, and forgiving loan balances after 10 years for eligible borrowers. If the policy goes into effect, it could benefit more than 40 million borrowers and alleviate $400 billion dollars in debt.
The plan was blocked by the Supreme Court in July 2023. Consequently, according to recent polls, 47% of young Americans hold the Supreme Court responsible for the lack of loan forgiveness.
The administration has been trying to find their way around the blockades. As of October 4th, 2023, they have managed to forgive 7,000 public-service workers of their loans, a total sum of $9 billion. Beneficiaries were teachers, firefighters, and folks with disabilities. As economists claim that the worsening trend in the debt crisis, the Biden administration is back at the drawing-board. They refined the proposal for a review on December 11th and 12th, 2023.
The new proposal must also appeal to Republican lawmakers. Over the past few years, the Biden-Harris administration has encountered staunch opposition from the GOP especially in the senate. Many Republicans argue against broad student loan forgiveness, characterizing it as unfair to those who have already paid off their loans or chosen not to attend college. Senator Bill Cassidy even went on to call the SAVE plan a scheme. In turn, Sen. Cassidy and other GOP senators have introduced their own bills to address the root causes of the debt crisis. Bills such as “College Transparency Act (CTA)” and “Informed Student Borrower Act” aim to increase the transparency around tuition costs and the student loan process.
Within the Democratic Party, there are conflicting opinions regarding the best approach to tackling the student loan debt crisis. Democrats are caught in a limbo of appeasing Republicans and their own party. House Representative Tim Ryan, has joined the Republican cry that student loan forgiveness could give constituents without degrees the wrong impression. Moderate Democrats, including Senator Joe Manchin, have been more hesitant, favoring targeted relief measures.
Progressive Democrats, such as Representative Alexandria Ocasio-Cortez, have not only encouraged Biden’s SAVE plan, but have pushed for even more ambitious measures. Rep. Ocasio-Cortez wants more widespread debt-cancellation, and higher debt amounts than $20,000. She also supports tuition-free public universities. The internal division complicates the legislative process and makes it challenging for Democrats to unite around the SAVE plan.
Future debt relief plans crucial for removing barriers to higher education. As students are applying to college, it’s no doubt that cost is a determining factor in where they apply.
Sarah Cheng ’24 said, “For me, many out of state colleges are out of question because public schools usually don’t give a lot of aid to students who are residents of other states.” For universities such as the University of Michigan, while the average in-state costs for Michigan residents is around $35,000, for people living outside of the state could range from $76,000 to $80,000 per year.
Additionally, Dasha Smirnova ’24 said, “Finance and paying for college is a big part of my college search process. I don’t want to graduate with hundreds of thousands of dollars in debt, especially if I want to pursue graduate school in the future.” Smirnova is not alone. According to the National Center for Education Statistics, the number of Americans pursuing post baccalaureate programs is projected to increase from 3.2 million to 3.4 million.
As the crisis continues and with President Biden’s bid for the presidency in November 2024, all eyes are on the state of student loan debt relief. How President Biden addresses the $1.77 trillion crisis could play a determining role in voter confidence, especially considering the campaign promises from the 2020 election.
Sarah Cheng ’24 said, “For me, many out of state colleges are out of question because public schools usually don’t give a lot of aid to students who are residents of other states.” For universities such as the University of Michigan, while the average in-state costs for Michigan residents is around $35,000, for people living outside of the state could range from $76,000 to $80,000 per year.