Student debt is another of those issues where Indian-Americans tend to fall into the camp of “If you’re stupid enough to incur student loans, you should pull up your socks and pay it off.” There is also the belief that most student debt is incurred by art history majors and other graduates who have been grasshoppers whiling away their summer studying non-STEM subjects without considering their future career prospects. “These Americans,” a wise uncle who has scrimped and saved all his life for his child’s college tuition will say, “they are so financially irresponsible.”
On the face of it, it seems like a reasonable opinion to have. Immigrants from countries with strong saving cultures cannot fathom why anyone would go into crippling debt for an education. And it is easy to think that the calls to erase student debt are coming from a place of selfishness and recklessness. It also seems patently unfair to people to who have been prudent with their own money.
But there are few peculiarities of this $1.6 trillion crisis of student debt in America that are worth considering:
After World War II, the G.I bill provided benefits to white veterans of the war that included a hugely subsidized education. But Black Americans were denied these benefits, creating a structural inequality that persists to this day. Nearly 85 percent of black students carry student debt today. (By being denied a college education, previous generations were prevented from building wealth.)
Before 1981, college used to be affordable. But then President Ronald Reagan pushed through cuts to federal spending that decimated state spending on education. Surging college costs and proportionate increases in student debt resulted. Private institutions also stepped in to lend to students, often at usurious rates. Since 1980, U.S. college tuition and fees have increased by 1,200 percent.
During President George W. Bush terms, the administration made it much easier to provide online education, and for-profit colleges boomed. Enrollment in these institutions increased by 329 percent during those years. Students looking to better their lives became the targets of slick marketing campaigns.
Interest rates on student loans are often structured in such a way that borrowers end up repaying several times the original amount. Horror stories can be found on the internet.
The 2008 recession severely impacted the ability of people to repay loans and exacerbated the crisis. People who lost their jobs also went back to school to try to gain new skills. Since then, the cost of a four-year college degree increased by 25 percent and student debt increased by 107 percent.
Despite the odds stacked against them, only one in ten students has defaulted on a loan payment. But it continues to be a crippling burden on a demographic that is the future of this country.
Studies have also shown that student debt forgiveness would not only go a long way in redressing historical economic injustice, it would affect many economic and social metrics. It would allow for investment and entrepreneurship among disadvantaged communities, better childcare, better retirement planning, indeed every aspect of life.
According to credit rating agency Moody’s:
Long term, a reduction in student loan debt could help improve the formation
of small businesses and households, as well as spur an increase in homeownership.
Blanket student loan debt forgiveness would mostly benefit people who would
have likely paid off their loans over the long term.
So far, the Biden administration has taken the following steps to ease the student debt issue for federal borrowers affected by the pandemic:
Interest and collections for federal student loans have been extended through Aug. 31
In April, the U.S. Department of Education announced steps that will bring borrowers closer to public service loan and income-driven repayment (IDR) forgiveness by addressing historical failures in the administration of the federal student loan programs. More than 3.6 million borrowers will also receive at least three years of additional credit toward IDR forgiveness.
The administration is also considering a blanket loan forgiveness per person, though the amount is still in question.
Become better informed about the facts around student debts. The resources below link to information around the topic so you understand the arguments and how to advocate for them. Keep checking back here for TSB activities around this issue.