Student debt: an overdue problem

I had a hard time making up my mind on what $ 1.7 trillion means, which equals twelve zeros. Twelve. It surpasses by orders of magnitude the debt of numerous African countries like Niger and Senegal, or any South American or Eastern European. That’s the total student debt for Americans as of April 2021. 

Forty-five million Americans, like the entirety of Argentina or Uganda, are currently in student debt, some of them dragging their entire families to bankruptcy, ruining life plans (“I didn’t get married because I didn’t want to have anybody saddled with my debt” ), among other incapacitating dilemmas, like not being able to save for housing or to make decisions for the future. This has an impact not only on the life of those affected and their families but also on the national economy.

President Biden signed an executive order to extend the pause on student loan payments, which started at the beginning of the pandemic in March 2020, until September 2021. During his presidential campaign, he addressed the need to forgive at least $10,000 of federal student loans per person, as proposed by Senator Elizabeth Warren. However, there have been voices from Democratic leaders to increase it up to $50,000.

There has been disagreement on if this should be made at all. In favor of, there was a study (Di Maggio et al., 2019)1 on a group of people whose debt got canceled due to the loss of the paperwork from their creditor, and how they were able to improve their quality of life, increase their geographic mobility, probability of changing jobs and their income, which in turn reduced their other debts, affecting positively those around them.

There are a lot of layers to it: if it is true that a higher degree increases the chances to earn more, even if taken into account the inequity between men and women, then the debt should be justified…right? But what about all those loans given to those who pursued a degree that is it known to not have such a revenue? Where that money to pay the loan in the first place would come from? On the other hand, a law degree from Harvard cannot mean the same as one English degree in any other university. Should both be forgiven as the same? However, numbers show that only 0.3% of the borrowers went to those elite schools, not making a strong enough argument to debunk debt forgiveness for being “unfair”.

Debt forgiveness, then, has more nuances to ponder that are not only economic. It is also considered a way to level the field when it comes to racial inequalities. Black, Native and Latino borrowers tend to get more in debt than their white peers, since they already come from lower-income backgrounds, and have a harder time paying it, causing the debt to drag them down after college.

The highest loans (over $40K) are mostly taken by Black borrowers (32%)

My question is why there is debt in the first place. Isn’t education something to be accessible for everyone? The US constitution does not state that explicitly, but the 14th Amendment has been applied to education-related issues when it comes to inequality. However, when talking about higher education, it seems that it becomes a matter of “who can afford it” instead of seen as a tool for social growth and wellbeing. I hope that at some point the discussion turns into how much value we put in education, making higher education part of a sustainable future as a society.

[1] Maggio, M. D., Kalda, A., & Yao, V. (2019). Second chance: Life without student debt (No. w25810). National Bureau of Economic Research.

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