Policy Discussion: Student Loan Forgiveness

Policy Discussion: Student Loan Forgiveness
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Policy Discussion: Student Loan Forgiveness
Student loan debt is a growing area of concern among policymakers, researchers, and the general public. As of February 2019, the debt exceeded 1.5 Trillion, which is the second highest type of household debt after mortgages. To date, discussions have emphasized on the impacts that student loan debt. This study details the causes of the rising college costs, trends of this phenomenon over time, its consequences, counter-arguments, existing proposals, and reforms.
Rising College Costs
In the recent past, students in the US have been paying more for college- a factor that has significantly contributed to the outstanding loan debt in the country. Current literature in economics trace the rising college costs to several causes. According to APPA (2013), a steady drop in both state and federal support, a pattern of cultural changes, technological innovations and economic cycles are just some of the major factors that combine to inflate college costs (APPA, 2013). Gale, Harris & Renaud (2014) attribute the current crisis in higher education costs to other reasons such increase in campus budgets caused by increased labor costs, and competition among learning institutions driving up their spending on glamorous facilities (Gale, Harris & Renaud, 2014). Other studies on the subject note that the past worldwide recession and the slow rate of recovery by governments gave birth to this issue. However, from all these studies, it remains unclear how much of the rising cost is a result of the declining public support for higher education. Understanding the highlighted contributing factors is critical in pointing out possible solutions.
College Degree Worthy?
Although students have been paying more for higher education, they have also been earning less after graduation. These trends have led policymakers, parents, economists, and other stakeholders to question whether a college degree is still a worth area of investment. In The Federal Reserve Bank New York journal, Abel & Deitz (2014) conclude that although college costs have risen while individuals struggle to secure a job after completing their degree, one still needs to consider the benefits to determine if a degree is a good investment. They continue further to explain the importance of weighing the costs against the benefits and establish that the average American still finds a university degree as a wise economic decision (Abel & Deitz, 2014). Those without a college degree continue to encounter declining fortunes in the job market. There are indeed struggles among graduates; however, investing in a degree is becoming more critical because failure means falling several steps behind.
The Trend in Student Loan Debt
The Federal Reserve Bank New York (FRBNY) provides accurate figures of student debt figures for the last two decades and as a result, is key in observing the trend of these debts. According to FRBNY, education debt grew from $243billion in the second quarter of 2003 to $586 billion in the second quarter of 2013 (Blom & Blagg, 2018). It is worth noting that during this period, over this decade, student debt increased from 3%-9% of outstanding household debt. The debt has soared from $586 billion in 2013 to over $1.5 trillion in 2019 (Hegji, Smole & Heisler, 2014). Average debt has grown from about $18,650 to $39,00 over the same period. Also, the number of Americans with student loan debt who are over 60 years has quadrupled in the last decade from 800,000 to 3.2 million. This age group’s debt has risen steeply from $9billion to $69 billion.
Consequences
Excessive student loan debt can affect multiple economic implications on an individual and society. For individuals still in college, excessive debt can affect the rate of completion, their academic achiev...