There is a massive albatross or weight around the necks of our children as they enter the workforce, burdened with student debt that impacts the quality of their lives.
Education is the single highest investment most Americans make in their future. At the encouragement of society, school and parents, the goal is to acquire a college education with the thought of establishing financial security and a lifestyle of comfort and prestige: the purchase of a home, vacations, and money in the bank.
Instead, too many college students are limited by the constraints of repaying their financial obligations and avoiding the negative impact on their credit.
It’s time for a new game plan to tackle this monstrous problem.
One in 7 Americans (13.5%), or 45 million Americans, have student debt, according to an analysis of January 2022 U.S. Census Bureau data. Those 25- to 34-year-olds are more likely to hold student debt, but 35- to 49-year-olds owe the most.
Believe it or not, there are debates on what the real amount owed is. The federal government reports over $600 billion, while the Federal Reserve Bank of St. Louis suggests the collective amount of federal and private student loans as of August 2022 is closer to $1.75 trillion. Let me repeat that number — that’s “B” for $600 billion or “T” for $1.75 trillion. WOW!
According to U.S. News and World Report, the average student increased borrowing by 25% between 2009 and 2021 because college tuition has increased faster than household income and has tripled since 1980. In essence, we are continuing to dig this hole deeper and deeper with very little foresight of correcting this destructive course.
The student debt burden is having a devastating impact on the Black community as it widens the wealth gap. A study by Professor Constantine Yannelis at the University of Chicago found that “The average wealth of a white family is $171,000 while the average wealth of a Black family is $17,150. The racial wealth gap is thus $153,850.”
That same study found that the average student debt held by a white family is $6,157 compared to $10,630 for the average Black family. It doesn’t take a rocket scientist to realize if you make less money but borrow more, you are destined for a lengthy uphill battle.
There is also an economic impact on America when students default on their loans due to poor jobs or lower-paying jobs. Guess who picks up the tab? Not the schools — it is the taxpayers.
President Joe Biden’s student debt relief proposal, with its three-part plan and up to $20,000 in relief, is a step in the right direction and something is better than nothing. But we need to look at this issue from a holistic lens.
Some folks talk about managing student loan debt instead finding a solution, or they offer a reduction in interest rates or universal loan forgiveness.
Then there are the suggestions to offer free college tuition at community colleges, which by the way, allegedly increases enrollment by 26% and increases degree completion by 20%. Others point to free college/university education like in European countries.
The free tuition concept claims student graduates without debt would earn, save and invest more which could stimulate the economy. The downside, according to opponents of free college, is it is expensive (but public education is free), the rich would benefit more than middle-income and low-income families, and concern for more graduates and fewer jobs.
Again, it’s time for a new game plan.
When we look at the U.S. initiatives that have successfully worked in the past, I reflect on the G.I. bill, a law that offered a list of benefits for some of the returning World War II veterans, or the New Deal under President Franklin D. Roosevelt centered on the “Three Rs” — relief (for the unemployed), recovery (of the economy through federal spending and job creation), and reform (of capitalism, by means of legislation).
What if we create a new student debt program based on these two programs of service to our country, not just the military, but in education, mental health, rebuilding our infrastructure, and more? This is not a new or novel idea, but I believe it should be pursued.
The reality is, if we continue down the current path, we are only digging a bigger, deeper hole for our future leaders to overcome. This is unacceptable.
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