Who’s on the hook?

Federal student loan debt in this country clocks in at more than $1.5 trillion. Some 42.9 million Americans owe an average of $36,520. Some also drew on private loans.

Many borrowers qualify for relief under the CARES Act. How quickly the pandemic pushed them into dire economic straits and the sheer number that were already there shows how great the loan burden is in many households. Many college grads and dropouts barely make enough to cover payments and normal living costs. An unexpected expense or job loss brings them immediately to the brink. With loan interest increasing the tab, some borrowers feel like Sisyphus forever pushing the boulder up the hill.

Erasing existing student debt could juice the economy, but it does not solve the root problem. It would be unfair to all the borrowers who scrimped, saved and worked overtime to settle up their obligation. But more importantly, it does nothing to address how the next bright-faced group of freshmen will fund their education. On that front, normalizing and celebrating other paths, such as career and technical education, will help. But not everyone is cut out to be an electrician, plumber or mechanic. We need teachers, scientists, nurses, engineers and software developers, too. The student loan burden has caused many borrowers to delay buying a home or starting a family. The stress can contribute to mental health problems.

The average 18-year-old is woefully unprepared to be making decisions that will affect his financial, personal and professional life for years into the future. Teens need to be better educated about how the specific degree they seek will affect future earnings and about alternatives that can make realizing their dreams more affordable. However, a large chunk of the loan debt is for graduate education. Most of those borrowers went in with eyes wide open. They also on average make more and have higher employment rates. Low-income undergraduate borrowers may owe less but struggle far more.

A bachelor’s degree is the price of entry for many jobs, but it does not guarantee competency. Employers could help ease the debt crisis by using other measures to identify qualified candidates. Young people could start professional careers, make some money, and later choose to go back to school.

We also should stop thinking of colleges and universities as brands with varying degrees of prestige (and consequently higher price tags). An education does not require tricked out fitness facilities, state-of-the-art theater systems and fancy dorms. Plenty of fine minds have emerged from unglamourous community colleges and night schools.

The federal government should work to simplify and expand income-based repayment programs and those that offer loan forgiveness to graduates who agree to use their degrees in high-need areas. Offering incentives for employers who help employees pay off debt or take classes could also help.

Individual students may feel powerless when it comes to higher education costs, but collectively they wield enormous power. As a Harvard Business Review article points out, if enough high school grads decided to delay enrolling for a year or two, that could bring pressure on institutions to cut costs. Students could use that time to work, save, travel, volunteer and form a clearer idea of their goals for the future and how best to achieve them. That would be time well spent.

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