|Over the years, student loan debt has reached an astronomical level. According to the nonprofit organization Institute for College Access and Success, the total student loan debt in the US as of 2019 was $1.56 trillion / Photo by: digboston via Flickr|
Federal student loans offered by the US government are often less expensive compared to other types of loans and are unique because they are meant specifically for education funding. Over the years, though, student loan debt has reached an astronomical level. According to the nonprofit organization Institute for College Access and Success, the total student loan debt in the US as of 2019 was $1.56 trillion.
Understanding Student Loan Forgiveness Program
In the face of tens of thousands of dollars debt, many students feel helpless about how they are going to pay. Popular support among them is the Student Loan Forgiveness Program. This means that the government will satisfy a part of the debt after they made regular payments for a certain period. One of the most popular loan forgiveness programs is the Public Service Loan Forgiveness (PSLF) offered to individuals who work in public service and have made 120 consecutive monthly payments. The PSLF was created by Pres. George W. Bush. There is also the Teacher Loan Forgiveness Program that can be availed of by people who teach in low-income areas after five years in their position.
Donald Trump’s proposed budget
US President Donald Trump’s 2020 budget proposal indicates that the government is, however, planning to end the student loan forgiveness program and there would be a massive cut in education in general. If it eventually becomes a law, it will be applicable for the 2021 fiscal year, which will start this October. This is according to New York-based news provider Inquisitr.
|US President Donald Trump’s 2020 budget proposal indicates that the government is, however, planning to end the student loan forgiveness program and there would be a massive cut in education in general / Photo by: Gage Skidmore via Flickr|
Effect of eliminating the PSLF
The President and US Education Secretary Betsy DeVos believe that eliminating the PSLF will save the federal government money as it will not forgive billions of dollars of student loans. Their goal is to balance the needs of not just the borrowers but also the federal taxpayers but supporters of the PSLF argued that ending the program could deter the borrowers from entering public service jobs and may have an effect on public servants, including first responders, public defenders, prosecutors, firefighters, police officers, and US Armed Forces.
Education experts in the US criticized the proposal. Mark Kantrowitz, an expert on higher education policy, said that it will only make things more difficult for the student borrowers.
Only about 1% of the 110,000 individuals who applied for the student loan forgiveness program had successfully sought relief as of September last year.
|The President and US Education Secretary Betsy DeVos believe that eliminating the PSLF will save the federal government money as it will not forgive billions of dollars of student loans / Photo by: Gage Skidmore via Wikimedia Commons|
Why borrowers are refusing to repay their loan
About 30% of borrowers are also now considered in default or delinquent. Furthermore, only 50% of borrowers managed to pay $1 in their principal loan (amount originally borrowed) five years after they finished college. This is why the strikes happen and the majority of the strikers would say that the for-profit colleges they attended defrauded or misled them.
Nonprofit founder Sandy Nurse, who is currently running for a City Council seat in New York, explained via CNBC that she needs to be in debt for $120,000 “just for trying to improve” her understanding of the world. After 10 years of struggling to repay her student loan, Nurse decided to stop trying. She believes the system is failing them as people like her who availed the student loan have to pay back an “excessive amount of money for knowledge.” Other borrowers who participated in the strike meant to encourage people like them to stop paying it. Nurse added how she either had to get health care, pay her rent, or pay her loans. “It’s one of the reasons I don’t even think about having children. How can anyone afford it?” she continued.
Kantrowitz said though that even if millions of borrowers took part in the strike, the government still possess strong powers to compel payment. Some consequences to the borrowers would be ruined credit, collection fees, and wage garnishment.
Debt Collective’s co-founder Thomas Gokey said they are not encouraging borrowers to commit “financial suicide.” Instead, they should find the means to make their monthly bill down to $0. Debt Collective is an organization that aims to get all federal and private student loans canceled and make college education free.
Student loan debt: statistics
Stock investing platform The Motley Fool data also shows that there were an estimated 5.2 million federal student loan borrowers considered in default in the first quarter of 2019 alone. There were 2.7 million in forbearance and 3.4 million federal student loans in deferment as well. About 92% of all student loans are federal loans and not private ones, and people with the highest total student debt ($548 billion) are those between 35 to 49 years old.
The total US student loan debt by year are as follows: 2004 ($345 billion), 2005 ($391 billion), 2006 ($481 billion), 2007 ($547 billion), 2008 ($639 billion), 2009 ($721 billion), 2010 ($811 billion), 2011 ($873 billion), 2012 ($965 billion), 2013 ($1.079 trillion), 2014 ($1.155 trillion), 2015 ($1.231 trillion), 2016 ($1.316 trillion), 2017 ($1.386 trillion).
Meanwhile, the student loan debt by age are as follows: 23 and under ($120 billion), 24 to 35 ($494 billion), 35 to 49 ($548 billion), 50 to 61 ($224 billion), and 62 and over ($68 billion). During the 2015 to 2016 academic year, women tended to avail of the student loan more for college education than men. About 41% of female undergraduates during that period took debt compared to 35% of male undergraduates. The nonprofit American Association of University Women (AAUW) likewise estimates that almost two-thirds ($929 billion) of the total outstanding student debt in the United States in 2019 were availed of by women.
One of the reasons why women have more outstanding debt than men is because of the gender wage gap, which means that men are likely to earn more than their female counterparts. As a result, women have a hard time getting out of their student loans as compared to men. By the time women graduate from college and have a full-time job, they often begin earning 18% less than men. Four years after graduation, the wage gap reaches almost 20%.
Our World in Data, a scientific online publication that focuses on large global problems, shares that women’s earnings sharply dropped in 1980-2013 after they give birth to their first child. Thus, it is referred to as the “motherhood penalty.”
Pres. Trump’s proposal will not automatically become a law as it will still face legislative scrutiny. Yet, it is likely that student loan balances will continue to increase as college costs also rise. So, borrowers should still take steps to avoid damaging their credit.