One of president Joe Biden’s initial campaign promises was wiping $10,000 per student borrower currently in debt. The president has been more than occupied with dealing with the fallout of the COVID-19 Pandemic and geopolitical tensions, but now it seems he is able to add some resolution to this current predicament. On April 18th, Biden announced that 3.6 million borrowers indebted will receive some form of aid as they look to repay outstanding debt. He also promised complete forgiveness through the IDR (income-driven repayment program) after 20-25 years of interest paid. This move was necessary as student debt has reached unprecedented levels extending to $1.75 trillion at the end of 2021. The question becomes, are the president’s efforts enough to tackle this problem head-on? What does the future of student debt forgiveness look like once this precedent is set?

The recent action was taken by the administration only canceled a fraction of student debt outstanding specifically a little over 1% of the $1.75 trillion. According to press secretary Jen Psaki, cancellation of student debt could still be “on the table” as the administration looks to further provide relief for millions of more Americans. As discussed in the last post, canceling student debt entirely is dangerous as it sets a precedent for future delegation of debt problems when borrowers begin to tread water. The future of debt forgiveness is an important topic to discuss as it affects millions of Americans explicitly and tens of millions more implicitly.

The escalation of student loans 2008-2021 (cnbc.com).

Another truth is that the United States is currently in about $30 trillion worth of debt itself, a figure that has risen ever since 2001. The U.S. government must be vigilant about excessive spending, especially in such a precedent-setting event that total debt forgiveness would create. Honestly, I believe president Biden is currently pursuing the best course of action by providing nominal amounts of support based on scheduled payment plans. The IBR (income-based repayment) was created in 2009 and has served useful by allowing students to plan for payments and receive forgiveness based on their responsible decisions. President Biden plans to revamp this program and look to make it more effective in use for all Americans.

In 1999, then-president Bill Clinton started an initiative to make America debt-free by 2013, an initiative that clearly reversed (rollcall.com).

The future of debt repayment relies on correcting the mistakes of the past. For too many years, borrowers were steered in the wrong directions which caused the ultimate fallout that currently exists today. President Biden has a challenging task of reforming programs such as IBR to make them more centric around the borrow rather than collection agencies looking to make a profit off of extended interest time frames. The government does not exist to bail individuals out and cancel debt entirely, but instead as an organization that creates a solid foundation for its constituents and offers advisory and assistance along the way. We are currently at a crossroads where the outcome of this adversity is solely in the hands of the president and congress. Time will tell if payment plans are reformed and if millions of Americans can find their way back to being debt-free.

On April 6th, the Biden-Harris Administration chose to extend the student loan pause while the economy recovers from the tumultuous pandemic. In this period, all student loan repayment is paused including interest and collections until August 31st, providing borrowers time to organize and create a repayment strategy. As discussed in prior installments, the student-loan debt problem has worsened over the last decade as borrowers fell behind on payments due to adverse economic conditions as well as out-of-control unemployment during the pandemic. While this announcement provides in-debt individuals with time for repayment, will the administration provide additional guidance and assistance or will it continue to prolong addressing this problem until it suffocates the very people it is supposed to help?

From day one, President Biden has made it his goal to tackle student debt, but has been unsuccessful due to other economic issues (wsj.com).

Another idea that has been thrown around by the administration is “canceling student debt” across the board and providing each and every person with a new slate. In an idealistic world, sure this would solve the issue; however, the current condition of the economy rules this idea out. The U.S. government has just transitioned from a period where stimulus was dispersed widely across the country at unprecedented rates. The amount of money circulating in the economy has caused dangerously high inflation levels and has placed the Federal Reserve in a sticky situation. Canceling student debt would only further increase the amount of money within the economy, force higher price levels, and effectively drive up inflation further.

So if canceling student debt is not the solution, what is? A potential solution is decreasing the interest rate attached to student loans following the period of pause. This could ease the minds of borrowers as they can create longer payback plans based on available cash. Here repayment could be on their terms, yet borrowers would still be incentivized to pay back loans and lenders can receive payment. The truth is, cancellation of student debt is not only unreasonable but it is irresponsible. Incentives should exist, and while economic conditions are tough, borrowers have an obligation to repay the commitment they made before earning the degree of their choice.

We are currently living in the reality of reckless decision-making. The current market conditions are a direct reaction to a period where quantitative easing and pumping the economy full of the stimulus was the direct solution to battling the economic conditions brought on by the pandemic. Jobless claims, a measure of unemployment, were reported at a 60-year all-time low just the other day. While on the surface this looks like a good thing, the reality is that no one is looking for jobs. Unemployment is artificially low because the U.S. government and Federal Reserve enabled jobless Americans to not look to find work.

A graph illustarting the drop in continued claims, or indivduals continuing to claim uneployment after one week of searching (Fred.com).

This example alone exists only to show the need for incentives. Canceling student debt would only destroy accountability and make economic conditions worse. While I believe that certain measures such as lower interest rates on student loans should be enacted to stablize the student debt problem, the U.S. government does not need to bail indivduals out who got themselves into this very predicament. The gracious pause period represents an opportuntiy for borrowers to reaccess their current situation and produce a plan of repayment. Time will only tell if this will actually happen.

Scholarships. We all want them, but do we all really need them. One of the age-old discussions is the extent to which scholarship money is delegated towards merit vs need.

As of 2022, only 7% of students are given some form of scholarship. Predominantly these scholarships are issued to students attending private universities where base costs are heightened. That being said, the U.S. Department of Education issues $46 billion annually, mainly in the form of need-based stimulus for students living in low-income households. This figure is not surprising, but excluding government-funded scholarships, what does the distribution of outside scholarships look like?

A graph that illustrates the discrepancies between aid given by public vs private universities (educationdata.org).

It is estimated that there are around 1.7 million private scholarships issued every year, making up about $7.1 billion. A majority of these cash awards are based on merit including standardized test scores, high school GPA, and essay competitions. With these parameters as discussed in the previous installment, students who have plentiful access to support such as SAT test prep are at a distinct advantage over their peers. The same argument can also be made about GPA requirement scholarships and essay competitions as having a solid support system and resource availability correlate with receiving better grades and the assistance necessary to excel at writing essays.

Government scholarship aid based on family income level (educationdata.org).

To combat these social discrepancies, institutions have tailored certain scholarships towards different minority groups to “level playing fields” and spread scholarship distribution throughout the population. Currently, minorities receive only about 28% of merit-based scholarships which poses the question, are these efforts enough?

Some institutions have even eliminated merit-based scholarships in order to allocate more funds towards need-based scholarships, but could this shift potentially be harmful to the scholarship structure? Merit-based scholarships act as an incentive for hard-working high school and college students to go above and beyond academically and within their extracurriculars and are a pivotal element to the motivation of high-performance. Merit-based scholarships should not just be scrapped but rather reformed to encourage and empower a larger population of students.

One of the most well-known pre-college opportunities to earn the National Merit Scholarship Program. Here students take the PSAT/ NMSQT their junior year of high school and the highest performers by state receive letters to move on to the next round of consideration. Why should a standardized test weed through thousands of applicants decide who really should be a “National Merit Scholar?”

The point is, instead of deciphering if merit should remain a pinnacle of certain scholarships, maybe we have an obligation to change the meaning of merit. Yes merit should include academic performance and achievement, but it should not be capped at just that. Involvement outside of the classroom defines a scholar, and thus, should always remain superior when deciding scholarship canadates.

The College Board. Love it or hate it, is an organization that found a way to completely take over the college entrance process. The infamous SAT (Scholastic Aptitude Test) is a college entrance requirement for schools across the United States that has sparked a debate on whether there is a direct correlation between spending more money and the “dream school” acceptance rate.

A graphic illustrating the hourly wages paid to tutors (redwoodbark.org).

Unlike most tests taken during high school classes, the SAT is a test designed to measure skills rather than knowledge. This exposes the industry to a secondary market where tutors and test-prep guides teach students the methodology behind performing well on these exams. These services wildly vary in price ranging from group sessions costing $50 and programs that “guarantee” test scores such as the Princeton Review 1400+ program that cost over $1,500. The question then becomes, should monetary incentives exist in a process such as college admissions?

An advertisement for test tutoring from Test Genie (www.testprepgenie).

Cost should be separated from the college admissions process because it corrupts the procedure by providing the option to essentially “pay” to get into college. Within this solution, standardized tests are removed and admissions become more experience-based rather than solely based on test scores. Here the secondary market for tutoring and test-prep will become obsolete as the SAT will no longer be considered.

This type of shift is already prevalent as most colleges removed or made optional testing requirements during the COVID-19 pandemic. The pandemic inadvertently sparked a movement away from test-centric admissions and allowed universities to highlight other aspects for applicants. By having nearly two-thirds of public universities declare test optional, it illustrates how fickle test scores really are on an application, and how their absence might instill a change for the better.

The one valuable aspect that the SAT presented universities was a benchmark that was used to filter through applications. For institutions with low acceptance rates that receive tens of thousands of applications, a nearly perfect SAT score is merely a check-in-the-box. If standardized tests are abolished, what method should be utilized to separate standout applications from mediocre ones? AP and IB testing could be a potential answer, but not all schools have access to these programs, and some offer more classes than others. Evaluating individuals solely on their extracurriculars and experiences is another option, but an overreliance on this category could potentially bring on response bias if applicants know that their fraudulent applications could trick readers.

Is there a solution that levels the playing field but does not delegitimize the process? What will fill the void that could exist with no standardized admissions exams? Is there a future where costs are eliminated from the college admissions process?

Across the world, 24 countries have omitted the financial burden that receiving a degree from a higher education institution can entail. These 24 nations have made college free — well not exactly. Would adopting a “free college” system in the United States solve the student debt crisis or will it only force greater civic and economic turmoil?

One particularly interesting example of a country with “free college” is Norway, one of the few nations that offers free education to citizens and internationals. In Norway, most universities are publicly funded by the government. At these public universities, there are no formal tuition charges, and the government even offers programs where students can receive loans to cover the additional expenses and use them as stipends. With all these generous benefits, there must surely be some substantial costs, right?

Taxes. The top marginal federal income tax rate in the United States is 43.7% for individuals who make over $500,000 a year, for Norway it is 38.2% for any person who makes over $85,000 a year. That’s right, the top tax rate is applied to a much larger percentage of the population and the tuition deficit is paid by more than just the rich and ruling elite. Countries such as Norway who have adopted a socialized higher education system surely do not have a student debt problem, but they do have a social gap problem, leaving most “equally” poor.

Oslo, the capital of Norway, is divided based on class today. The “Oslo slums” are depicted above where impoverished individuals live separate from the rest of society (afroginthefjord.com).

How would this system stand in the United States? Yes, it is true that the college enrollment rate is steadily increasing, but should individuals who don’t pursue a college degree pay extra taxes for programs they reap zero benefits from? The tax rate hike bombards the middle class and, in some cases, can take just about half of what individuals make. The upside is of course more opportunities for young adults to go to college who were previously deterred by cost; however, with this new demand, would universities even be able to keep up with increased enrollment with potentially decreased funding?

Economists believe that the plan for “free college” created by President Joe Biden could be feasible in the long run based on future tax revenue generation (www.cnbc.com).

Although most people hate tuition costs, myself included, they help preserve personal choice. Going to college is a personal investment, a personal decision, and a personal commitment, so why should the public fund an individual’s college experience? The student debt problem might be stunted when tuition costs are absent, but how would consumer budgets change when they are paying more taxes?

Nothing is ever free, the costs of college are still there, just disguised better and distributed to a greater amount of people. Sacrificing personal liberties should never be the answer for solving financial deficits, making college free would undermine the very principles that separate the United States from other nations and would create new adversities for a greater amount of people.

With a 20-year progressive increase in college tuitions, certain undergraduate and graduate degrees are becoming less and less financially sustainable for students. This has left thousands of graduates with up to hundreds of thousands of dollars in student debt that might linger with them for the rest of their lives.

But wait, isn’t going to college supposed to lead to financial stability and an array of job prospects that counteract this debt? The fact of the matter is that such egregious tuition prices have presented a recipe for disaster for students embarking on pricey educational journeys with minimal opportunity to earn anywhere near to what they spend.

An image depicting a graduate broadcasting her Venmo for funding towards her student loans (businessinsider.com).

One of the most prestigious universities in the world, Colombia University, offers a master’s in film degree (MFA) that forces students to take out a median debt of $181,000 only to earn an annual median salary of $30,000. Why would students volunteer to spend 6x of their projected annual salary to receive a degree that only further puts them at a disadvantage? No one would want to put themselves into a pit of debt that is so suffocating that it might be impossible to surmount.

The same could be seen with most liberal arts degrees at every institution. The recent boom in STEM-based degrees has seen a proportional increase in salary expectations with this field, but for graduates with degrees in the humanities, the salary expectations are less desirable. If you aren’t enrolled in a prestigious university or have superior connections to land a high-paying job, the degree and all the hard work you are putting in might be for nothing.

A graphic illustrating the student debt problem in the United States (prudential.com).

The question then becomes, how should universities then incentivize students to choose these majors other than just by interest or passion? Creating a “tiered” tuition system that bases degree costs on median expected salary present an option that would counteract this phenomenon. Here students will receive discounted tuition if they choose a degree that leads to a field that is less lucrative. This would eliminate the student loan problem that has become progressively worse with current general tuition increases.

How could universities then recoup revenue lost with discounted tuitions with certain majors? Students choosing to embark on majors that lead to higher-paying careers could make up the difference, but how is that fair? It really isn’t because the front-end costs of loans also come with interest payments that could complicate future plans. Yes, this solution might be equitable, but it also has unintended consequences such as deterring others from choosing to go into STEM fields based on higher tuition costs.

$1.53 trillion (cuna.org).

$1.58 trillion. That’s the amount of student debt that exists in the United States today. While a majority of this debt is owed by future medical professionals, the resounding amount of it that is never paid off is owed by those who received a degree in the humanities. How should this problem be addressed where select tuitions are subsidized, but NOT at the expense of others? Is there a solution that presents equity for those who are pursuing their passion?