Written By: Anton Sawyer
Student Loan Debt: Headlines VS Realities
Since I was a teenager, there have only been two reasons I can surmise that would make someone want to go to college. The first is for a job or career. The second is for education. Neither of which has ever made sense to me.
When it comes to the first reason, a job, that ship had already sailed by the time I was of age to go to a university of some kind. To me, it seemed like a waste of money when considering the amount of money it would cost to go to some form of higher education, only to get a degree that didn’t guarantee anything other than a piece of paper that said you possessed a certain amount of credentials from the get-go. Also, the cost leads me to the second reason; an education. As far as that’s concerned, I always felt that internet access and a library card were much more cost-effective if I really wanted to learn about something.
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That’s what today’s piece is going to focus on: the cost-to-benefit ratio of getting into debt via student loans versus the financial security offered by getting into a line of work by attaining a degree. By the end of it all, I’m sure you’ll see why the choice to forego college may have been the smarter of the options. As with everything else, the devil is in the details. And when you see just how little current and upcoming administrative changes are going to impact the total amount of student loan debt, it’s nothing short of depressing. But whether you think it’s the government’s business to bail out the literal lifeblood of the economy or not, by the end of the piece I’m sure you’ll agree that some kind of relief needs to be given.
HOW STUDENT LOANS BECAME A PROBLEM
When looking through history, student loans aren’t a new concept by any means. Dating back to 1840, when Harvard University first began offering student loans to attending students, the idea of financial assistance in the name of higher education is nothing new. In fact, the beginnings of what we now consider the modern-day concept of how student loan debt is accrued is nothing new either, having been around for 30 years via the Higher Education Amendments of 1992. This created the FAFSA, the Direct Lending program, and unsubsidized Stafford loans, which meant that now students had to cover interest costs while in school rather than the federal government. Up until this point, the federal government was subsidizing student loans. Since then, like with income inequality, the chasm has widened due to a number of different presidents and congressional leaders over the decades which have allowed various loopholes to become exploited in a number of creative ways when it comes to banking.
A 2020 CNBC report found that since 2008, the cost of a four-year college degree has increased by 25%, and student debt increased by 107%. Not only are these financial burdens towards the students rising when it comes to the ratio of going to college versus completing university studies, but the numbers also don’t lie and the payouts are terrible. Per a 2018 article by Ellen Ruppel Shell, a professor in the department of journalism at Boston University, found that people who have dropped out of college—about 40% of all who attend—earn only a bit more than do people with only a high school education: $38,376 a year versus $35,256. For many, that advantage is barely enough to cover their student loan debt. Shell also found that we appear to be approaching a time when, even for middle-class students, the economic benefit of a college degree will begin to dim. Since 2000, the growth in the wage gap between high school and college graduates has slowed to a halt; 25% of college graduates now earn no more than does the average high school graduate.
It's pretty easy to see that many of those who get a loan to attend school, don’t complete it. Of those who do, a substantial number of them aren’t able to use the degree for some financial windfall. In fact, The Indie Truther’s Nicole West has had this exact experience when it comes to her furthering her education after high school.
Wanting more out of life, she decided to pursue a career being an aesthetician. Given her history with appearance modification and how it saved her life, this future career goal gave her a sense of purpose. However, like most others we've seen that want a higher education, she had to take out a student loan.
Her loan, like many others that we've seen, was filled with minutia which would keep her lining the bank's pockets with interest payments for years to come. West felt luckier than some, as her loans only came out to $15,000, but it would be the fine print that would show her luck to actually be folly. From when the loan was originally taken out in 2015 until the federal payment stoppages began in 2020, she had already paid $10,000 of it back. Yet, her balance still shows as being almost $10,000 still due. Also, in following suit with the research done by Shell, West was able to get her LMA license after completing her schooling, yet hasn't worked in that industry since Covid began. This is just one case in a million.
BIDEN’S HEADLINES OF DEBT RELIEF
Since he began his presidential run in 2019, Biden made no bones about his feelings when it came to student debt relief. He made it clear that he was willing to do what was necessary to forgive student loans up to $10,000 for every borrower. He would often spout some talking point about complete forgiveness during his stump speeches, making the verbiage vague enough to where everyone thought that all student debt would be wiped when in reality he was technically only on the hook for the $10,000. No matter his campaign promises—real or perceived—in a moment you’ll find out why even that amount is insulting. So what has he done since his take over of the White House?
Per Forbes, in the first year of the Biden administration (2021), he eliminated $15 billion in student debt. This is being followed up by the cancellation of another $6.2 billion in student debt for the year 2022. These headlines do capture the attention of the average reader who has been fed nothing but horror stories by mainstream news outlets of those being crushed by the weight of student debt since these gigantic numbers are the complete opposite of the pre-conceived notions of the majority. But let’s give these numbers a little context.
Now, it is worth noting that the $15 billion in debt cancellations done by Biden was more than any other president, and more than 675,000 student loan borrowers have benefitted. OK, so far so good. The fact that Biden has extended student loan relief three times since becoming president isn’t bad either.
Looking ahead towards the proposed relief of 2022 has its positives as well. With this plan, the Education Department says that 550,000 student loan borrowers will get student loan forgiveness sooner due to these changes. And in aggregate, these student loan borrowers will get $6.2 billion in student loan cancellation.
Again, this all seems on the up-and-up. So where does the problem lie? The bigger picture. As of January 2022, the Forbes report also estimated that there are 45 million student loan borrowers who collectively owe $1.7 trillion of student loans. And in reality, the $15 billion debt cancellation has benefitted only 1.5% of student loan borrowers and less than 1% of outstanding student loan debt. These numbers are minute.
I can understand how difficult it is to fathom the realities of these numbers. When you get into the sphere of talking about currency in terms of trillions, or even quadrillions, it’s difficult to conceptualize. But that is how massive the student loan debt problem has become, and these are figures we need to not only gain perspective on, but also ways to combat their growth.
A POSSIBLE SOLUTION?
The only solution that I can see when it comes to erasing this kind of debt is by doing what Biden (and even to a lesser degree Trump) has been doing for the past few years; chip away at it. The $15 billion of student loan cancellation doesn’t even include billions of dollars more of student loan forgiveness that Biden, ex-President Donald Trump, and Congress provided through student loan relief. This was added by Congress when they passed the Cares Act, the $2.2 trillion stimulus package, in March 2020. Given that financial institutions live and die by projections if they found that the government was going to wipe out potentially hundreds of trillions of dollars in interest in a very short period of time, it could cause another massive collapse. Though this is a project that is most likely going to take decades, I think the numbers have shown how the current system provides very little in the way of upside versus the potential calamities that can await for those taking out a loan to further their education. And if you pull back and look at the even bigger picture, it seems it would be in the best financial interest of everyone to lift this financial weight off of so many, thereby allowing more disposable income to be pumped back into our local economies, strengthening our society as a whole.
But then again what do I know? I just have the internet and a library card.
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