US Student Debt Crisis – Analysis


By Selene Sandoval*

Over the past decades, the average debt for students receiving their bachelors has tripled. A recent report by the Consumer Financial Protection Bureau shows that students who borrow loans for a university education will owe around 35,000 dollars- an exponentially higher amount than the average recorded in 1993-94 of 10,000. The daunting statistics, don’t show the full picture of the complete impact that the loans will have on the lives of the individuals who borrow, and the economy.

The student loan crisis continues to be one of the biggest hurdles to attaining a healthy economy in the United States. Student debt is the second highest debt for Americans, falling only behind mortgage debt amounting to an estimate of 44 million student borrowers who make up a $1.4 trillion dollar student loan figure. However, compared to the statistics of recent decades including those of the 90’s they don’t also take into account other factors that are affecting recent graduates with debt like the likelihood of attaining a job in their desired field and the limitations of credit scores when trying to buy a home or a car. The student debt skyrocketed 256 percent from 2004 to 2015, causing students to collectively condemn the tuition spikes.

All around the world, students have been protesting these rapacious loan policies that are leaving millions with an average of $37, 172 in debt as of the statistics for the class of 2016 report. At the University of California Santa Barbara, these protests have taken the shape of student lead marches such as the participation of the Million Student March that was a combination of different social issues such as rising student tuition and the Black Lives Matter movement.

The Million Student March was organized with months in preparation with 110 college campuses planning a walk-out in demand of tuition free college, cancellation of current student debt, and a $15 dollar minimum wage for all campus workers. Their slogans included messages such as a call for free and fair education and involved chants on the current political climate such as with the police violence against African Americans. The first march was held on November 12, 2015 with visual acts of resistance such as one of the buildings on campus creating a space with blank sheets of paper with the hashtag #studentdebt where students could write the amount of debt they currently had while attending the university. Some examples of the writing ranged from to the words: Too much! Fast forwarded to today’s current dilemma with the future of student loans, there is going to be huge changes for students who defaulted on their loans.

For one, any student who is currently in default with their loans will see a double digit rise in defaults. Protections put in place by previous presidencies to protect students from deceitful practice was lifted. Under President Barack Obama’s administration, a memo had barred the old bank system of charging interest fees of up to 16 percent if the student had defaulted in their loans. In 2016, the default amount in dollars was $137 billion dollars in just nine months of students who had not a payment in the first nine months. This amount is a 14% increase from the previous year, a number showing that students are struggling to pay off their loans more than ever before. Currently, 8 million people are in default and the Trump administration has reversed some of the policies in place that protect student borrowers.

This policy was known as the Borrower Defense to Repaying that forgave student loans if a school used greedy or deceptive tactics to convince a student to attend their school by taking out loans. According to the U.S. Department of Education, almost half of the students who took out loans did so under the Family Federal Education Loan Program (FFEL). This program would work with private lenders to ensure that the loans being used were subsidized loans.

However, when students defaulted on these loans collectors would tackle on exorbitant fees that made it nearly impossible for these students to pay off the debt they had already accumulated. One of the major lawsuits out currently, are against Navient, the nation’s largest servicer of student loans that has been cheating millions of students. “Navient is accused of deliberately steering borrowers away from income-based repayment plans that could have lowered their loan costs — in order to maximize its own profits,” an issue that has left many students with the diminishing prospect of finding a career path to pay off these loans. One example of negligence in the case of Navient was erroneously handling injured military veteran loan records as defaults instead of discharging them from their federal student loans if they were eligible due to a disability.

With Betsy DeVos, as the current head of the Board of Education, this reversal on the Obama memo to protect loan borrowers from deceitful practice could affect around 7 million people who currently owe $162 billion dollars in FFEL loans. In fact, the removal of the protections was seen as having such substantial and procedural flaws that democratic attorney generals from 18 states and the District of Columbia to sue Betsy DeVos over her move to freeze a rule that helped students who were defrauded by for-profit colleges that was going to allegedly be in effect July 1, 2017. The lawsuit is being lead by Massachusetts attorney general Maura Healey who is suing Betsy DeVos and the U.S. Department of Education for canceling federal protections that were put in place to help students from student loan abuse.

Another change that is coming along with the Trump administration is changes to the gainful employment rule. The gainful employment regulation is going to require vocational programs at for higher education institutions and community colleges to meet a debt to income ratio for students. This rule would hold these financial institutions accountable, and cut off their federal financial aid if the programs don’t meet the minimum requirements. The gainful employment rule wants to make it a requirement to provide a disclosure to students before attending if they are at risk of meeting the requirements. The requirements are that graduates annual payments should total 8 percent of total earnings or exceed 20 percent of their income.

This plan in theory, sounds like a plan geared towards helping students from taking on a program without having to be swimming in debt after completion and not securing a job that can repay these loans. However, there are major flaws with this plan like the statistics only measuring those students who actually complete the program they pursue and not the students who drop out, who have a higher rate of defaulting on their loans.

In short, there are many policy changes being set in motion during Trump’s presidency that could affect millions of students who hold debt that surpasses any other debt such as auto or credit card debit. The future prospect of these students who are currently in debt, and for students who are going to pursue higher education in the next four years is uncertain.

About the author:
*Selene Sandoval
. Los Angeles, California. Proud first generation daughter to immigrant parents from Mexico. Recently graduated from the University of California Santa Barbara with a degree in sociology, and a minor in education.

This article was published by Modern Diplomacy

Modern Diplomacy

The Modern Diplomacy is a leading European opinion maker - not a pure news-switchboard. Today’s world does not need yet another avalanche of (disheartened and decontextualized) information, it needs shared experience and honestly told opinion. Determined to voice and empower, to argue but not to impose, the MD does not rigidly guard its narrative. Contrary to the majority of media-houses and news platforms, the MD is open to everyone coming with the firm and fair, constructive and foresighted argumentation.

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