As Student Debt Cripples the Economy, Lawmakers Step Up With Solutions

Higher education used to be the privilege only of America’s wealthy, and out of grasp for the majority of those in the country. Thanks to programs like GI Bills, the spreading of state-based and backed universities and then eventually government student loan options, college eventually became something that was within the reach of many regardless of their financial background.

Within the last decade, that has been changing. A nation-wide recession has had more states cutting subsidies while institutions at the same time dramatically increased the cost of tuition. A highly competitive and technical job market that depended more deeply on advanced degrees as well as the pedigree and contacts that one can only get through post high school education has made an undergraduate degree a necessity rather than a perk for finding employment.

Today, a four year college education is expected even for the most entry level of work, and graduate degrees, doctorates, JDs, medical degrees and more aren’t just holding students out of the job market longer and longer as they are being accumulated, but are driving up the cost of college astronomically. The debt snowballs, while the wages being earned once they are lucky enough to land that first position is unlikely to come anywhere near covering the costs of getting there.

According to Time Magazine, student loan debt has now exceeded over $1 trillion, an amount that is 300 percent larger than just 10 years earlier. As Time reports, ”According to a December study by the Institute for College Access & Success, 7 out of 10 students in the class of 2012 graduated with student loans, and the average amount of debt among students who owed was $29,400.”

That $30,000 in student loan debt may not seem like a drastic amount, but that doesn’t take into account the number of those students who are unable to begin to make any sort of payment because they either are continuing their education, have had to get a forbearance because they cannot pay yet because they have no job, or are simply delinquent. For those students, the amount will continue to ratchet upward, especially as interest accrues.

“Student debt piles on because it takes years to pay off loans, and many can’t afford to pay back such hefty loans until later in their careers,” writes Time. When debt piles on, that’s an economic problem not just for those student loan owners, but for the rest of the economy, as these graduates hold off on purchasing homes, renting apartments, buying cars, moving to different cities, or even the small dollar purchases like a new outfit or a night out at dinner. Without that spending, the rest of the economy remains sluggish as well.

Fortunately, some congress members are recognizing the crisis and looking for a way to solve it. New York Senator Kirsten Gillibrand has been championing the Federal Student Loan Refinancing Act, which would cap interest on student loans to just 4 percent, an amount that is comparable to many recent loan rates for current home mortgages. “I urge President Obama to make refinancing student loans a top priority,” said Sen. Gillibrand in a recent press release. ”Our young people should be able to refinance in the same way that our businesses and homeowners do.”

Loan refinancing is one option, but President Barack Obama put a number of possibilities on the table that would also help to curb the burden of debt. Of them, the proposal to forgive any remaining debt after 20 years of repayment, or 10 if the recipient was active in public service, is perhaps the most promising. Although debt forgiveness hasn’t yet made it into any reform package, with an election just months away and the youth voting block one of the most highly coveted voting blocks in the nation, perhaps negotiations for more forgiveness opportunities will be on the horizon.

Photo credit: Thinkstock


Jim Ven
Jim Venyesterday

thanks for the article.

Amy Kirby
Amy Kirby8 months ago

Taking a student loan is a choice. If you take it -- be ready to face consequences. Certainly the majority of students are too young to understand this kind of responsibility. This is the reason young people have to deal with debt these days. The best option is if you manage to avoid taking a loan in the first place. Some of the students I know study remotely since this option is a lot cheaper. They use resource for term paper writing and work part or even full time to make a living instead of creating a debt.

Serena A.
Serena A.about a year ago

All the lawmakers offer solutions for student loan debt problem. But does somebody know ones which would be really effective? I can’t call any examples. This problems has already ruined millions of lives and nobody know how it’s gonna end up. I think that student loans should have lower interest rates and longer repayment terms. Many young people apply to CashAdvanceLoanStore company to get some financial assistance. It’s hard to get employed if you don’t have working experience, it’s like a cycle and nobody can tell how to break it.

Aud nordby
Aud nordby2 years ago


Eric Lees
Eric Lees2 years ago

Tuition rates have risen faster than inflation due to the government distorting the market forces that keep prices under control. So we end up with people getting worthless degrees that can not find a job relevant to their education and out of control prices.
Under a normal market when prices rise too much demand goes down which in return forces prices to go down. In a normal free market this leads to lower prices not higher. So yes it is the fault of the government.

The housing market is another example where government interference has distorted the market and we all know where that lead in 2008.

Mary B.
Mary B.2 years ago

Pamala and Eric, you're both believing false ideas. Not everything comes from taxes, and this is not 'the government's fault. You oppose the solution of debt forgiveness because you think what you do.As a result, lots of people as still in debt for education they should never had to pile up that much debt for.There used to be Pell grants and low interest loans. There can be again.

Fi T.
Fi T.2 years ago

Financial management course in need

Eric Lees
Eric Lees2 years ago

Lawmakers are great at coming up with "solutions" to fix problems government has caused. Get the government out of the student loan business and the market will correct the out of control tuition rates.

Pamela Bacon
Pam Bacon2 years ago

If all these student loans are just forgiven where will the money come from to make up for it? My taxes will go up!!! No thank you. If you take out a loan you repay it. And there are way too many "professional" students out there, getting higher and higher degrees in fields where there aren't any jobs to begin with. Do your research and get a degree in a field where there are actually jobs to be had and then you can honor your agreement.

Lynn C.
Lynn C.2 years ago

Wow Nils! Stellar comment - that's exactly what I see happening! From cradle to grave we are programed to buy-buy-buy (mostly plastic crap while young) and we judge everything we see through a monetary haze. For crying out loud, I've known people who see a tree in board feet~! No wonder we're so uncaring about our planet - we don't even SEE it. Our world has shrunk to a paycheck and the latest list of things to buy. UGH~!

I read Ron B.'s comment just now and I have the same feeling about the 'future' that many people are so worried about ..... what future??

Cormac McCarthy's "The Road" becomes more likely every day.