The accumulated total of student loan debt in the United States has hit an approximate $1.3 trillion. Of that, $1.1 trillion is federal loan-student debt, and a further $200 billion is made up of private loans. It is a substantial sum, the greatest amount yet in U.S. history.
Student loan debt was the topic Wednesday at the Senate Health, Education, Labor and Pensions (HELP) Committee’s fourth hearing on the anticipated reauthorization of the Higher Education Act (HEA). More Americans have student loan debt than ever before. In 2014, 41 million Americans had some student loan debt, up from 28 million in 2007.
Despite the rising debt, Senator Lamar Alexander (R-Tenn.), chair of the HELP committee, said that college is more affordable than students believe, comparing the average debt a student takes on for four years of college to the price of a car. The average debt after four years of college is approximately $28,400, according to the Federal Reserve Bank of New York.
“We should take steps to make college more affordable, but I believe we should also cancel misleading rhetoric that causes so many students to believe that they can’t afford college,” Alexander said.
Nevertheless, as the cost of college rises over the years, so does the amount that students take out to fund their educations. Dr. Elizabeth Akers, a fellow at the Brookings Institution, showed in a prepared statement that households with debt have larger balances to pay back than in years past. In 1989/1992, 84 percent of households had a debt between $1,000 and $10,000, and less than 6 percent of households with debt had amounts that exceeded $20,000. In 2013, only 49 percent of households had loan debt of $1,000 to $10,000—the majority had more.
Increasing tuition costs are largely held to be at fault for rising levels of debt. However, the cause of rising tuition is subject to debate. Some believe that public subsidies have encouraged colleges to avail themselves of the “free money” and jack up tuition prices. Others say it is the competition among institutions to build the most expensive and cutting-edge amenities on campus. According to a recent report from Demos, a New York-based think tank, ultimately state divestment in funding to public institutions of higher education is to blame for the increase in tuition.
Whether state divestment in higher education is the root cause of spiraling tuitions, the majority of states are spending less on students now than they did prior to the recession, Alaska and North Dakota being the lone exceptions. Other states, such as Louisiana and Wisconsin have been making headlines for their proposed cuts to higher education.
Dr. F. King Alexander, president of Louisiana State University, testified at the hearing to say that the federal government should use the $700 billion in federal higher education assistance as “leverage” to ensure that states continue to allocate funds for higher education. In other words, if states want to make use of federal aid, they must put forward money from their own budgets.
Otherwise, F. King Alexander warned, states may eliminate funding for higher education altogether. He cited a report from the Pell Institute for the Study of Opportunity in Higher Education, which found that, by 2025, Colorado may have reduced its state budget for higher education to zero, followed by Louisiana, Massachusetts, and others.
Akers said that there was a silver lining to the fact that students are borrowing more. “Those with higher levels of debt typically have higher levels of degree attainment and thus higher earning potential,” she said. She also said that graduates were not much worse off, since their student loan payments have not increased on a monthly basis. However, Akers acknowledged that the repayment period is longer—according to her prepared statement, in 1992, the mean term of repayment was 7.5 years but had increased to 12.5 years by 2013.
Sen. Elizabeth Warren (D-Mass.) disagreed with Akers’ assessment that graduates were not substantially burdened by the debt increase. She said that longer debt repayment periods were hindering individuals from moving on with their lives. Instead of saving for retirement or their children’s education, graduates must focus all their energies on repaying loans from their university days.
Many at the hearing expressed concern that the rising debt and cost of tuition impact low-income students the most. F. King Alexander said that current popular college ranking systems, such as US News and World Report, pressure public schools to attract students with high GPAs and test scores and recruit students from out-of-state, supplanting the lower income state resident population.
Staff writer Catherine Morris can be reached at [email protected].
