Bearing the Burden: Unveiling the Student Loan Crisis in 2024 and Exploring Paths to Financial Relief

The United States currently owes $1.75 trillion in student loan debt. The Federal Reserve declares that student loan debt amounts have risen by 66% during the last ten years. According to the College Board, 54% of graduates with a bachelor's degree in 2020–21 had student loan debt, with an average sum of $29,100.

The Biden-Harris government has established a student loan forgiveness program as a way to address this situation. For millions of young borrowers who are drowning in student loan debt, some experts contend that forgiving student loans is a vital first step towards relief, while others think it would just be a short-term fix. 

In this blog, we will look into how student loan forgiveness will not tackle the student loan crisis and suggest possible student loan crisis solutions.

Understanding Student Loan Forgiveness

What is Student Loan Forgiveness? Due to the high cost of tuition at many colleges, students are forced to take out loans in order to pay for their education. But the education they get is frequently insufficient and does not equip them for the workforce. Practical and industry-focused education is given less attention.  

Many graduates thus have trouble finding work in their field of study and are unable to pay back their loans. This leads to a vicious cycle in which students borrow money to pay for schooling that does not sufficiently prepare them for the workforce and then find it difficult to pay back those loans when they are unable to secure employment.

How to get Student Loan Forgiveness? President Joe Biden introduced a student loan forgiveness program in August of last year to eliminate federal debt. The plan was made with the intention of providing millions of borrowers with relief by waiving up to $20,000 in debt. Through this program, borrowers can get their student loan debt forgiven or cancelled without having to make payments. The loan forgiveness plan applies to households making up to $250,000 a year, with individuals making about $125,000.

Why Is Loan Forgiveness Not A Solution To The Student Loan Crisis?

Even though politicians are presenting student loan debt forgiveness as an answer to the student loan debt crisis, it is not. There are many underlying issues and problems with this program. 

The biggest issue with this program is that it doesn't address the root cause of student debt: the high cost of higher education. Undoubtedly, forgiving student loans may give relief to existing borrowers, but it does nothing to address the underlying issue, which is the increasing tuition costs. If tuition costs continue to rise, students will continue taking education loans, and this forgiveness program will only become a band-aid solution.

Another downside of this program is that it can be costly to taxpayers. If the government forgives all outstanding student loan debt, it would cost an estimated $1.6 trillion. That's a significant amount of money that could be used for other purposes, such as investing in education, defense/military, or infrastructure.

Possible Solutions To Reduce Student Loan Debt

Agreed that student loan forgiveness may provide some relief, but it cannot be seen as a permanent resolution to the student loan debt crisis. So, we will have to dive deep to address the issue of student loan debt. 

Make education affordable

The US is among the most expensive countries in terms of higher education. So, the state should take measures to make higher education more affordable and accessible so that students can pay them off through their education.

Increasing monetary aid for public universities and community colleges is one way to lower tuition costs and provide more financial support to needy students. If higher education is affordable, students will have no need to take loans to be burdened for their whole life. 

Empower students to make better choices 

The students should be able to determine how much they should spend depending on their income after graduating. Many students don't calculate the total spend on college and take up loans that their degrees will never be able to pay. 

Consider a student taking a degree in literature and poetry; their loan-taking capacity would be lower than that of an engineering or CS student. Informed choices can reduce the number of borrowers drowning in debt.

Awareness about federal loan repayment options.

Many repayment plans are in place for students that can help them pay their loans, but many are unaware of them. Income-based repayment has been available since 2009, where the monthly payments are set at 15 percent as per the discretionary income amount. After 25 years, the unpaid amount is forgiven. 

Another similar plan, pay-as-you-earn, has been available since 2012, but the monthly payment here is set at 10 percent, and the loan is excused after 20 years if unpaid. Choosing a plan according to income can reduce the default loan burden.  

Find a course that pays well 

Students should be encouraged to make more informed decisions about their education. If students are provided information about the costs and long-term benefits of different degree programs, they will be able to take on courses that will make them employable. 

Instead of taking a degree and ending up in a low-skill job, which can be done even without graduating, they will learn job-ready skills. 

Encourage industry-focused training 

One way to help people pay their loans is by making them eligible for high-paying technical jobs. For this, the state should support vocational schools and technical training institutions like coding bootcamps, which prepare the students for the job market. 

These short-term programs offer affordable, industry-focused training leading to well-paying jobs without needing a four-year degree. Additionally, these programs can help address the skills gap in many industries today, providing benefits for both students and employers.

By expanding access to these types of programs, the state can offer more opportunities for students to succeed without taking on large amounts of debt.

Conclusion

While student loan forgiveness may temporarily relieve some borrowers, it is not a solution to the fundamental issues that lead to student debt. So, the focus should be on making education affordable, improving the quality of education, providing students with the skills and experience needed to succeed in the job market, and awareness about debts and repayment plans. By doing so, we can create an environment where students can be encouraged to cover their education costs without relying on programs like student loan forgiveness.