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Why Are We Still Paying These D*mn Student Loans

It’s Like, Really Bad

The second most crippling financial burden of the Millennial generation (and Generation X and Generation Z…) is student debt. Second only to mortgage debt, it’s higher than both credit card debt and auto loans.

In 2010, student debt hovered at around $830 billion, but as of May 2022, the country stands at a whopping $1.7 trillion in debt.

According to original reports by the Education Data Initiative, the average public university student borrows $30,030 to obtain a bachelor’s degree, private, non-profit university attendees borrow $33,900 and private, for-profit students borrow $43,900.

In the media’s reporting on student loans, there is one statistic that often gets left out; the interest rate. In June 2022, the interest rate for a 30-year fixed mortgage, the most popular type of loan was 5.72%, a record high since 2009.

The average rate on federal fixed-rate student loans in May of 2022 was 6.42%; not a record high. (Note: This author is a college graduate from the class of 2014 with federal student loans given at a fixed-interest rate of nearly 9%; anecdotally, the highest I’ve heard is 12%, but feel free to add your numbers to the comments.)

Users on social media are sharing their stories, urging students not to make the same mistakes. @baddie.brad voices a common frustration about the insanity of the interest amounts.

A mortgage provides shelter, plus the act of buying property is generally considered a solid investment (save for a few significant periods in economic history). But now that bachelor’s degrees don’t guarantee high-paying jobs, higher education in America is no longer a solid investment.

The Cry To Cancel It All

The idea to scrap it all originated with online support by Robert Applebaum, a lawyer who graduated from Fordham Law School in 1998 with about $65,000 in debt, and his 2009 petition.

In Facebook’s heyday, Applebaum posted a proposal for debt forgiveness on his account, citing how its impact would significantly benefit the economy if former students had several hundred more dollars a month to spend. The post gained over 300,000 likes on Facebook, and it spurred him to create ForgiveStudentLoanDebt.com.

“Your student loans are with you for life — both federal and private loans,” he said. “There is no recourse for student loan borrowers if they run into trouble. The only recourse they have is to put the loans into forbearance, like I had to do, or economic deferment.”

The idea snowballed into one of the official goals of the Fall 2011 Occupy Wall Street movement. Protestors occupied Zuccotti Park, located in Manhattan’s financial district, to challenge the economic inequality of the Great Recession, corporate influence in politics, and the government financial bailouts. The slogan, “We are the 99%,” calling out how 1% of the country owns most of the wealth, exemplified two out of three Americans’ discontent with the income gap.

Progressive Senator Bernie Sanders adopted the slogan into his campaign for President, along with a strong push for debt cancellation.

As of 2020, “at least one in four student loan borrowers are delinquent, in default, or otherwise unable to pay their loans due to low income or economic hardship.”

In 2020, the push for cancellation began to reach Democratic moderates, with Senate Minority Leader Chuck Schumer (D-NY) sending out the Tweet: #CancelStudentDebt.

Today, some form of canceling student debt is supported by 59% of senators, including 53% of Republicans, making the move a rare example of bipartisan support.

President Biden’s Promise To Cancel Student Debt

One of the most politically progressive elements of President Biden’s election campaign was the promise to cancel student debt…but did he really promise it?

Pitted against more progressive Democratic incumbents Sanders and Senator Elizabeth Warren, Joe Biden adopted some cancellation of debt, but never explicitly promised to cancel it all.

On November 16, 2020 Biden said in a speech that forgiving $10,000 in student debt "should be done immediately."

But as for who will be doing the canceling and who will actually be forgiven, he has gone on record saying that he is open to canceling $10,000 per person making under $150,000 per year. Sure, any cancellation would be nice, but 45 million people have student loans; assuming they all make under $150k — which they don’t — that would be a cancellation of $450 billion, bringing the national student debt down to a still-whopping 1.25 trillion.

Although more than half of those 45 million people have more than $20,000 in student loans, they are often the least likely to be making consistent payments; 40% of student loan borrowers did not finish their degree.

Those with the highest loan payments often carry higher education loads, like medical school, and are thought to have an easier time paying back loans, thanks to generally higher income. However, that’s not always the case. Rep. Alexandria Ocasio-Cortez points out that it’s particularly cruel that the $150k income cap would exclude so many of the pandemic’s front-line healthcare workers.

So how close are we to getting a crumb of debt cancellation?

As of today, the Biden-Harris administration lists 7 top priorities: Covid-19, Climate, Racial Equity, Economy, Healthcare, Immigration, and Restoring America’s Global Standing. Although forgiving student loan debt would impact many of these matters, the issue is notably absent from this list, despite its enthusiasm on the campaign trail.

In mid-May, Sen. Elizabeth Warren, Chuck Schumer, and Raphael Warnock met with President Biden to push for $50,000 in relief per borrower - that would wipe the debt of 72% of borrowers, as opposed to the $10k plan’s total erasure for about 33% of borrowers.

Senator Elizabeth Warren has been a consistent supporter of debt forgiveness and has claimed President Biden could do it as early as tomorrow. Getting Congressional approval is not necessary; he could sign it away in an executive action if he so chose.

Federal Student Aid Chief Operating Officer Richard Cordray more recently announced concrete plans to revamp student-loan servicing in the coming year.

Regarding the six different student-loan companies handling federal loans, he said the "disjointed servicing system is often confusing for borrowers and, frankly, the quality of work has not always met our standards." Current loan servicing contracts are set to expire in December 2023, but students with loans are not interested in more convenient options for repayment; they don’t want to repay it at all.

The Pandemic Pause

Beginning on the unofficial ‘day the world shut down,’ March 13, 2020, the U.S. Department of Education enacted a moratorium on student loans. Loan payments were suspended, the interest rate dropped to 0%, and there were no collections on defaulted loans.

That hold has now been extended 7 different times. The most recent freeze is currently in effect until August 31, 2022, just two months before midterm elections.

The two-year pause is arguably the best case for debt forgiveness, especially as the U.S. is likely heading into a recession. To restart student loan payments in a time of layoffs would be particularly vicious for 45 million Americans.

Is A College Education Even Worth It?

Women make up about 60% of the university population and The American Association of University Women reports that women hold nearly two-thirds of all student loan debt; Black women hold a disproportionately large amount of that debt. Between the gender pay gap and the racial pay gap, it can be particularly challenging to repay those loans.

Historically, when an occupation becomes female-dominated, pay decreases. So now that the college-educated class is predominantly women, what does that say about the perceived value of an education?

I graduated high school in 2010 with mostly A’s; I was not presented any options besides a 4-year college education. Community college was stigmatized by the media, my parents, and their peers, and trade schools were never mentioned because of my high grades.

It’s been common knowledge for many years that a bachelor’s degree guarantees a “good” job; my first job out of college was bartending. So was my second.

Having a bachelor’s degree did eventually open doors for me, but how many open jobs currently hiring on Indeed require a bachelor’s degree when an onboarding process could teach a new employee everything they need to know to perform their job?

College brochures with sprawling campuses illuminated by fall leaves promise friendship, academic rigor, exciting activities, and high quality of life. They may hold up famous alumni as beacons or boast statistics about job placements, but the old adage ‘it’s who you know’ is still king.

At least 70% of students graduate with debt. As debt rises, that return on investment becomes lower and lower. To escape the madness, a 2019 survey concluded that 86% of young Americans wanted to become an influencer.

Even rockstars sometimes go to music school; it’s no surprise that the influencer life — building a likable personality and recommending products — is one that requires no education; no threat of debt hanging overhead in their prime years for buying property and growing families, or even for the rest of their lives.

Joe Biden, the Student Loan Crisis, and the Problem with Economic Stimulus

Critics will always argue whether it's "worth it" to help people in need.

After its precipitous fall in February of 2020, the government took major steps to stabilize it.

By Monday, November 16th, the Dow had surpassed all previous records, closing at 29,950. Meanwhile, the national death rate as a result of COVID-19 was rising toward its horrifying January peak. Meanwhile, working Americans continued to struggle and suffer, wasting their gas money waiting in endless lines for limited supplies of free food.

If you, like nearly half of U.S. adults, don't own any stock at all, the numbers above are essentially meaningless. Even for most of the people who are invested in the stock market, their investment isn't substantial enough to make up for issues like widespread underemployment.

And yet, the Federal Reserve has poured $4 trillion into maintaining the stability of investment markets and ensuring that the Dow, the S&P 500 and various other numbers on charts that seem increasingly disconnected from reality move in the right direction. Why is that?

The answer to that question is complicated, but it is closely linked to the reason why President Joe Biden has been on the receiving end of a lot of scrutiny and pushback on the topic of student loan forgiveness — and why he hasn't already taken steps to cancel some or all of student debt already.

Recently the amount of student loan debt in the United States surpassed $1.7 trillion. That amount has more than tripled in the last 15 years, with around 45 million Americans currently holding some amount of student loan debt, and an average burden in excess of $30,000.

Most of that debt is nearly impossible to discharge through the standard bankruptcy process. And the fact that most of that burden falls on young people — whose careers are less established and who face generational declines in wages and wealth — exacerbates the impact of that debt. It's a major factor in the worrying declines in rates of home ownership, marriage, and birth rate among millennials.

It is widely acknowledged that the cost of higher education has ballooned out of control while it has increasingly been pushed as a necessary step on the path to prosperity. Underlying this problem is the fact that — unlike many developed nations — our federal government doesn't offer affordable public universities or fund education in fields like medicine and engineering where we always need more skilled professionals.

Why Is College So Expensive in America? | Making Cents | NowThiswww.youtube.com

Instead we offer government-backed loans and guarantees that incentivize institutions to invest in administrative bloat and in expensive development projects to enhance their prestige and entice prospective students with unnecessary luxuries. Teenagers instilled with little sense of the financial commitments — but an unwavering belief in the necessity of college — have become cash cows.

The system as it stands is clearly broken, and whatever other reforms are called for, the resulting debt crisis is interfering with the spending power and attainment of an entire generation. In the context of a pandemic that has affected the livelihoods of so many, it would seem like an uncontroversial act for the government to alleviate some of that burden of student debt.

And for the most part, it is. Opinion polling shows that the notion of providing some amount of student loan forgiveness is broadly popular across partisan lines.

The exception is among the pundit class — and the wealthy donors they represent. Because, while various political figures — including Democratic Senators Chuck Schumer and Elizabeth Warren — have urged Joe Biden to make student loan forgiveness an early focus of his presidency, others in politics and the news media have done their best to push back.

At the moment, a forbearance measure laid out in the CARES act has been extended through the remainder of 2020 — allowing those with federal student loans to defer payments for the time being. But further action being proposed would include forgiveness for debt owed to private companies.

Among the wide range of suggestions are legislation to provide $10,000 of debt forgiveness for individuals meeting certain restrictive criteria and $50,000 of automatic forgiveness for all student debt holders — which Joe Biden could theoretically have delivered through an executive order as soon as he took office.

In either case, some would still be left with large burdens of debt, and some would likely be hit with unmanageable tax bills — as debt forgiveness is considered a form of income. But the debate has not largely involved addressing those shortcomings. Rather, many have questioned whether we should be considering these proposals at all.

The objections tend to fall into three categories: It wouldn't help the right people, it wouldn't stimulate the economy as much as other measures, and "I paid off my student loans, so why shouldn't they?"

The last is patently asinine, and should be ignored or mocked as it applies equally to any form of progress — "My face healed after smashing against the dashboard, so why should we add airbags now?" If the people espousing this perspective want to be acknowledged for their fiscal responsibility, here's the entirety of the praise they deserve: Good for you.

The fact remains that many people are not able to pay off their student loan debts, which can have a ruinous effect on their credit rating, affecting everything from interest rates on other loans to — in a cruel twist — their employment prospects. There is a disturbing potential for an accelerating debt cycle that becomes impossible to escape.

Even for those who are able to pay off their debts may feel pressured by the monthly payments to accept employment that they otherwise wouldn't — contributing to an imbalance in the employee-employer relationship that could further suppress wages. In short, it's bad.

So while it's valid to point out that there are others in the economy more in need than college graduates, we can't ignore the reality of the student debt crisis. Along with other important measures — further extension and expansion of unemployment benefits, rent subsidies, and direct payments to make it easier for people to stay home — student loan forgiveness should be considered an essential part of COVID relief.

Which leaves only one complaint left: It wouldn't do enough to stimulate the economy.

The basic issue is that the benefit of debt forgiveness is spread out over years or decades of remaining loan payments. And because it would also contribute to recipient's tax burdens, there is a concern that much of the cost of debt relief would not result in short term increases in consumer spending — the kind that spurs quick economic growth.

While that's worth being aware of, doesn't this objection have its priorities reversed? Isn't the entire purpose of a strong economy to improve people's lives? So why are we unwilling to improve people's lives unless it primarily contributes to short term economic growth?

Clearly our entire system has embraced this inverted way of thinking. That's why it can pass almost without notice when the Federal Reserve spends $4 trillion to prop up investment markets.

We happily spend that amount on measures that only directly benefit the wealthy, and yet — when it's suggested that we should spend a fraction of that on a popular policy that could improve the lives of 45 million Americans — it becomes a point of great contention.

We all seem to have forgotten the essential truth that the economy is meant to serve us — not the other way around.