There’s a good chance that someone you know personally is struggling with student debt, even if they don’t talk about it.
It has become a pervasive problem in modern society – over 43 million Americans have student loans, which is roughly 13% of the population. Total student debt is currently over $1.7 trillion, exceeding both credit card debt and auto debt as the second biggest type of debt in the country after mortgage debt.
While higher education is often considered a pathway to success, the accompanying financial strain has become an undeniable reality for far too many. As the cost of attending college continues to skyrocket, so does the accumulation of debt, leaving individuals and families grappling with the consequences long after graduation day.
How Did Student Debt Get So Out of Hand?
The fundamental source of the student debt problem, at the end of the day, is that higher education has simply gotten more and more expensive.
According to data released by the National Center for Education Statistics, the average yearly cost of obtaining a 4-year degree in 1981, including tuition, fees, and room and board was $10,631 adjusted for inflation into 2021 dollars.
In 2021, 40 years later, the average cost had risen to $29,033 – nearly triple the inflation-adjusted cost.
Even with the rising cost of education, obtaining a college degree is still a major goal for many students. 62% of high school graduates choose to pursue higher education.
The Effect of Student Debt on Individuals and Society
For those burdened with student debt, the effects are multifaceted and far-reaching. Here are four big ways that student debt burdens society and individuals who carry it.
Burden on Students After College
The average American who earns a bachelor’s degree takes on $40,000 in debt and pays $350 a month for 10 to 20 years to keep paying for their education. For those who went to private colleges or pursued advanced degrees, the burden can be even more staggering.
The result has been a generational postponement of life’s big goals, like getting married, having children, buying a home or car, even launching a start-up.
According to a Gallup survey, “71% of student loan borrowers who are currently enrolled college students or previously enrolled students who dropped out of their program have had to put off a major life event. Roughly 29% of student borrowers have delayed buying a home, and 28% have put off purchasing a car as a result of student debt. Another 22% have had to stay put in their childhood home, and 20% have delayed starting a business because of debt.”
In addition to the financial burden, student debt can take a toll on a graduate’s mental wellbeing. According to a survey conducted by ELVTR, 53% of those holding student debt report that student debt has negatively affected their mental health.
63% of student debt holders in the same survey indicated that they either cannot or can barely afford their monthly payments.
Impact on Our Economy
The amount of student debt hanging over the U.S. economy is now greater than total credit card debt or total auto loans. The financial well-being of 43,000,000 borrowers – and their ability to contribute to the economy by growing families and spending and investing – has been seriously damaged.
Being saddled with decades of non-mortgage debt is a phenomenon without historical precedent. While the financial implication has a severe effect on a personal level for debt holders as discussed above, this effect also has an economic impact.
According to the Council on Foreign Relations, economists and policymakers agree that in previous generations, people were able to either pay their way through school or find jobs to pay off loans afterwards – but that the same isn’t true for recent graduates due to the rising cost of education.
This has spurned debates on policy solutions to both the cost of education and the current outstanding student debt.
Federal Loan Forgiveness Programs
From March 2020 through October 2023, the Trump and Biden Administrations maintained freezes on federal student loan payments. The current Administration’s more recent emphasis has been on loan forgiveness programs targeted primarily toward low-income borrowers and public sector professionals.
While announcements of new cancellations have been released regularly, through April 2024 only about 9% of total U.S. student loan balances have been cancelled.
The most recent major plan announcement in early April included significant cancellation levels of $20,000 or even more for low income borrowers that received Pell Grants.
However, this cancellation only applies to unpaid interest – it does not remove any of the original loan principal, which presumably will continue to accrue new interest into the future.
Borrowers Still Need Help
Many student loan borrowers are unlikely ever to benefit from a federal forgiveness program. And those who do qualify – particularly those working in the public sector or enrolled in income-based repayment programs – generally have to continue making loan payments for 10 to 25 years before they receive notification that some or all of their debt will be cancelled.
The Aunt Betty Fund recommends making monthly contributions, rather than full loan payoffs, for student loan borrowers who are or may become eligible for forgiveness programs. At the end of the day, borrowers desperately need your help – that’s why we started The Aunt Betty Fund. Whether you want to help a family member or a friend, or if you would like to help those with demonstrated financial need through our grant programs, consider donating today to make an immediate personal impact for a borrower struggling with debt.
