What Do We Do About the Student Loan Crisis?

Americans have accumulated over $1.5 trillion in student loan debt, which is now the second highest debt category in the United States, beating out credit card debt and coming second only to mortgages. The statistics vary, but the average student has about $30,000 in student loan debt at graduation. Though student loan forgiveness programs are available to some, there are far too few of them, and most that are available are public-service based, requiring the borrower to complete so many years in public service before qualifying for forgiveness.

The future of student loan forgiveness has been brought to center stage during recent presidential debates. The topic has become surprisingly important during this election cycle, as almost all of the Democratic candidates for president support some sort of student loan relief. However, the candidates differ ideologically within their plans. Previous candidates, like Beto O’Rourke and Kamala Harris, supported expanding existing programs like the Pell Grant or strengthening the current public service approach to student debt forgiveness.

Only two candidates, Sen. Bernie Sanders (I-VT) and Sen. Elizabeth Warren (D-MA), have plans for total student loan forgiveness. Warren’s plan would cancel up to $50,000 in student loan debt for up to 42 million Americans. Specifically, her plan would cancel $50,000 for every person with a household income below $100,000. Those with household incomes between $100,000 and $250,000 would receive “substantial debt cancellation,” and those with incomes above $250,000 would receive no debt forgiveness. According to Warren, this would cost approximately $1.25 trillion over 10 years, and she wants to pay for it through a proposed ultra-millionaire tax, which would raise taxes for households making over $50 million per year.

Sanders’s plan would eliminate the student loan debt of every American, regardless of household income. This would cost approximately $2.2 million over the next 10 years and would be paid for through a Wall Street tax. Sanders has also proposed the College For All Act, which would eliminate undergraduate tuition and fees, with the federal government picking up 67% of the cost and incentivizing states to pick up the remaining 33%.

Regardless of who wins the presidency, there’s no certainly guarantee that any student loan forgiveness plan will ever come to fruition, and even if one does, it could still be years before there’s any relief for borrowers. So what can we do right now? Investment professionals often promote 529 college savings plans, which is a great idea if you can afford it, but that’s simply not a reality for many Arkansas families. I believe high schools have a duty to help college-bound seniors navigate financial aid applications and make sure those seniors are taking advantage of every available resource. Fund My Future can be a great resource for those seeking financial aid information. Finally, let’s stress the importance of our public colleges and universities. They are almost always a much more affordable option than a private or out-of-state college and provide a similar, or even superior, education to students. I personally attended public school from Kindergarten through law school and am extremely grateful for the opportunities those schools provided.

As the 2020 election draws closer, expect to hear more about student loan forgiveness, how it’s affecting our economy, and how politicians plan to address it.

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