President Obama’s remarks about student loans during his State of the Union address ring true for millions. The President’s succinct message about the massive burden posed by student loans to millions of Americans was spot on: Cap student loan payments at ten percent of the borrowers monthly income. A similar proposal was presented by Senator Elizabeth Warren in 2013.
Since 2003, the total debt of individual Americans has ballooned from $7.2 trillion to $11.3 trillion. That is an increase of 56%. During the same period – Student Loans have quadrupled – growing from $241 billion to $1.03 trillion. Over the last 10.5 years, the total debt has risen by an average of 4% per year, but student loan debt has risen by more than 14% per year.
Student loans went from being 3% of total national debt in 2003 to more than 9% at the end of 2013. The combined total of auto loans, credit cards, and all other loans didn’t even budge over the past 10 years, staying at $1.8 trillion in both 2003 and 2013. And while more students are getting college degreees, the staggering increases in the cost of college have also resulted in the average debt faced by students ballooning.
In 2004, 65% of students graduated college with student debt. In 2012, it was 71%. And 600,000 Americans who began repaying student loans in 2010 defaulted on those loans by 2012, representing nearly 15% of borrowers. Student debt is increasingly becoming a major problem in the United States.
In 2010, Congress approved the Pay As You Earn plan, which sets up student loan payments based on a person’s adjusted gross income and family size. It reduced the monthly payments on direct student loans from 15% of discretionary income to 10%, and also assured after 20 years of consecutive payments — 10 years for those in public service — the remaining loan balance would be forgiven.
While Congress is making some progress – more needs to be done. Some thoughts include: Greater accountability with college costs; Teaching students the true burden of long term student loan debt; and, Better information regarding the cost/benefit relationship of college versus trade school or other choices.
Ultimately, the Executive branch and Congress are going to have to learn how to work together. The massive problem can only be addressed by a collaborative, bipartisan effort to stave off a potential crisis that will enslave generations of Americans.