Student Debt is a Very Big Problem

The Consumer Financial Protection Bureau recently estimated the amount of total student debt at nearly $1.2 trillion. (Yes, that’s trillion with a “t”) and reported that federal student loans alone make up more than $1 trillion of that amount, with private loans making up the remaining $165 billion.

But as the website Vox reports, actual debt incurred for college is probably higher. Some students or parents use credit cards, loans from retirement plans, or home equity lines of credit to pay tuition, fees, and living expenses. Those financial products aren’t included in the $1.2 trillion estimate.

The total amount of student debt in the US has more than tripled in the past 10 years, as more students attend college and a higher proportion of those students take out loans. Thanks to rising costs, they’re also borrowing more than students did in the past.

The staggering amount of student debt isn’t just bad news for the students anxious to find good paying jobs that will allow them to repay those loans; it’s a huge drag on the economy. Student loan borrowers are less likely to buy a car or a house, in part because they can’t save for a down payment. They have less disposable income for consumer spending. Their credit scores are worse.

And since the students taking on debt tend to be from needier families, the student loan crisis is yet another structural impediment to greater income equality.

There has to be a better way.

Many countries have either free higher education, or extremely low tuition and grant aid: Germany, Denmark, Finland, Iceland, Norway, Sweden, Mexico and Brazil. Other countries that don’t offer free higher education have instituted small student fees. Australia and New Zealand have a system tuition and fees, but student loan repayment is entirely based on later earnings; student borrowers who make less than $50,000 a year owe zero monthly payments, and never pay more than 8 percent of income.

If they can do it, so can we.

Remember when America was the land of opportunity and social mobility wasn’t just a story we told each other?


  1. I knew student loan numbers were bad but not NEARLY this bad. Thanks for educating us.

  2. The big banks, Freddie Mac and Fannie Mae received about $1.3 trillion in bailouts in 2008-09. Since the big banks own a lot of the debt, I believe an equitable solution is to call the matter a “wash,” then restructure the manner in which we approach higher education. Higher education would not be “free.” We all would pay for it. It is as much a part of infrastructure as our crumbling bridges. As the bumper stickers say, if you think education is expensive, try ignorance.

  3. When I entered college (UW-Whitewater) in 1966, tuition, room and board for the semester cost $1410. I don’t know what that would be in today’s dollars, but it certainly wouldn’t be $30 grand a semester. Some has to, and should, change.

  4. Sheila, do you know the reason that the actual cost (tuition, fees) of college has risen so much so fast? Did colleges and universities gain the same mindset that the medical community grew accustomed to , which was to keep raising the fees and people will just keep paying the price without any explanation or true necessity for the exhorbitant costs?

  5. Sheila, what you as an attorney should advocate is the simple reform of treating student loan debt like any other unsecured debt, dischargeable in bankruptcy. (Technically student loan debt is dischargeable in bankruptcy but it’s a higher standard. If that was done, then you’d see fewer lenders preying on people who are led into believing higher education of any sort will help them advance in their career. For profit institutions especially are taking advantage of student loan rules to encourage their students to rack up debt, debt they often never have any hope on paying back.

    Another issue is the inability or unwillingness of colleges and universities to control costs. The cost of an education has long exceeded the inflation rate because there is no incentive whatsoever for higher education to control costs. No matter how high they raise tuition, they get students who believe that a college degree is a magic bullet that leads to better salaries that will allow the debt to be repaid. For many graduates that’s no longer true.

  6. Nancy is exactly correct. She points to a major part of the problem that is overlooked…the ever increasing cost of higher education, far above what is needed to educate. Having government pay for higher education wouldn’t fix the problem of schools not controlling costs.

  7. You are so right, Nancy! The reason for anything and everything in our country has become “money”. Medicine has moved from being a profession to being big business. Education has taken the same greedy course. Just look at the state of Indiana and the “privatization” of what was once public education, even at the expense of society as a whole.

  8. The UIndy president spoke at Robin Run Forum this month about the wonderful things UIndy is doing (what else would he say?). It is keeping costs down, which includes starting salary for a professor at (only) $45K. I asked his opinion of Warren and Sanders (didn’t name them, just said “some presidential candidates”) saying we should follow the example of Mexico (!), Germany, etc. His reply was, “Obama is wrong, it can’t be done”. Oh, yeah? It is being done. Maybe he meant we in the U.S. won’t do it. Didn’t seem that was his meaning.

  9. Senator Warren has been fighting for student loan interest rates (8-12%) to be lowered near the level of bank’s borrowing (some 2-3%) so that students can live and breathe easier but Congress wouldn’t have any of that. That bill failed. Shame on Congress.

    When I was living in northern Indiana a decade ago, a guy I worked with was paying down a student loan from the bank for his Notre Dame degree. I asked how much was the loan? 100k. I said to him, that’s a mortgage payment and he said that was his and his wife’s balance from getting their graduate degrees but I know the guy wasn’t making much more than me. It would take him 30 yrs to pay that off with both he and his wife working. They would never be able to qualify to buy a home when they are already making one mortgage payment (the student loan). They had already started their family as well. This problem started years ago.

    Unfortunately, this is not news. What is sickening is that Congress didn’t want to push the banks to lower their rates for student loans.

  10. One reason education “has moved from being a profession to being big business” is because legislators and now the public expect it to produce something tangible that can be assessed. Colleges don’t produce little widgets that can be counted and measured for profit or loss. It’s much more subtle than that.

  11. On June 22, 1944, the Servicemen’s Readjustment Act of 1944 was signed into law by President Roosevelt, commonly known as the G.I. Bill of Rights. Since I was a veteran I availed myself of the G.I. Bill I received anywhere from $220 a month back in the 1970’s. Since I was a citizen of Illinois tuition was free to me if I went to State School. Illinois had an extensive state wide Junior College (JV) system. You could receive an Associates (Two Year Degree) or satisfy your first two year requirements and then transfer to a Four College for years three and four. The Junior Colleges were commuter Colleges so you could live at home. The Tuition was far cheaper at the Junior Colleges.

    I understand College is free in Germany to the student. It is not “free” of course it is paid for via taxes. Here in America though College is like Good Heath Care you can have it if and only if you can afford it.

  12. My granddaughter’s student loans totaled $55,000; two years college and three years Indiana University School of Nursing. She worked full-time throughout high school during vacations and did the same all five years of college. She became a CNA and worked in nursing homes to get on-the-job training. She is fortunate to have a job in her chosen field; she is one of the six-member pediatric heart surgery team at Riley Hospital for Children. Her student loans are all in her name and she is paying them, struggling but paying for them. In October 2008 when Bush gave those billions to banks, Wall Street, insurance companies, etc., he commented it would provide more available money for those student loans. When my granddaughter went to apply for her following year student loan; banks required co-signers. This kept many from being able to continue and complete their college education. They are probably still trying to pay for the loans they did obtain with low paying jobs because they are not college graduates.

    President Obama, in his speech here at Ivy Tech; set forth a simple, straight-forward plan to provide tuition-free education in community colleges throughout the country. You and I know this will NEVER happen because his plan included returning the tax rate on wealthy to what it had been before Bush lowered it and closing tax loopholes to big businesses. Yes; I know, I commented recently that President Obama’s biggest mistake was not to allow the tax rates for wealthy to return to previous rates on the date Bush set. I stand by that comment but…that doesn’t mean it cannot be done at this time. It won’t be done because the beneficaries of the lower tax rates are either wealthy and in elected offices or are supported by the wealthy who paved and paid their way. There are many repercussions from the current student loan problem which we as a country will pay for in the future; it seems to be the uneducated or undereducated who keep voting the same politicians into office and we are all aware of the local and national education situation today.

  13. In “The End of College” Kevin Carey believes as Nancy posted that brick and mortar colleges have priced themselves out of business. While the leader down that path has been the “elites” they will not suffer the consequences. There will always be wealthy status seekers. But the everyday colleges and universities will be replaced.

    Not that they’ll go out of business entirely. Most of their professional staff are not too dedicated to teaching anyway though I’ll bet that Sheila is an exception to that. They are dedicated to research and publication. Students are a drag on their real work.

    After reading his book I thought that I’d research his ideas of what will replace them so I signed up for a course on Coursera. A course in “Energy and the Earth”. As I am beyond being interested in proving to an employer that I know what I know it costs me nothing. It’s tought by a University of Wisconsin professor who is understandably well known in that field who has thereby extended his reach to thousands of students around the world and enhanced the universities street cred and apparently they feel that seeing as their old teaching model is at risk by cost, this will eventually pay the bills in more research grants. So they don’t charge, apparently, Coursera. The silicon valley venture capitalists behind Coursera have a business model that says that they can recover their relatively minor software expenses by offering credentials for their courses to students/companies who value them.

    The whole thing makes sense to me. The course that I’m taking at home is extremely well done. They use the power and reach of the Internet to produce a product that is somewhat up front intensive but has long legs, staying power, in enhancing their reputation and therefore research business.

    The only losers that I see are future students denied of the living together on a beautiful campus for four + years of socializing and growing up.

    The other insight that Nancy mentioned is that this same fate is in store for American health care. They have priced all but socialized medicine out of business. Their greed today has deprived their successors such a lavish living.

    So change is a given. The right’s resistance to it and worship of the past is futile. Greed has killed the golden goose. He will be replaced. He will replaced by liberal ideas that we are not yet out of tricks and therefore can replace the past with things that are better.

    First we have to let the conservative sputtering exhaust itself before democracy takes over and we move on.

    On to better.

  14. Louie’s comment is worth noting. Having transcribed oral histories of WWII veterans for the Indiana Historical Society for the past ten years, I’ve seen over and over again how that investment in people – affordable education through the G.I. Bill – produced an incalculable return. A thing that appears forgotten today.

  15. Pete is quite right. The cost isn’t worth the overall poor quality undergraduate students get. The public R1s were at one time institutions that took the education of undergraduates seriously. Today they are addicted to research and athletic “prestige” because that is how they now define quality, which means that the use of their resources is biased away from the once core mission of undergraduate education. Thus we get adjuncts doing the teaching (and doing it well), but at horrible pay scales while the tenure track research professors receive the high salaries with benefits. Fourth class citizens, the adjuncts are, and their teaching skills are not anywhere near as important as research grants and publications. And we get increasing debt of in state students as tuition is raised, and we get the admission of 50% out of state and international students at triple the in state tuition to maintain the R1 prestige lifestyle in the face of state appropriations that are not always increasing, perhaps because the public and state legislatures are becoming cognizant of what their real value system is. Not that research is bad. It is necessary and worthwhile to society, but there needs to be an equal re-emphasis on good and affordable undergraduate instruction that is part of the reputation of the university and a reward system that pays equally well for teaching excellence. Prestige needs to be based on more than research and athletics. It must include excellence in undergraduate instruction and the learning environment to be worth the cost.

  16. We have friends in TN who have a son who just graduated from high school. His dad was laid off for many years (4? 5?) There was NO way the son would be able to attend college. But, because TN is now offering free 2 year program similar to Ivy Tech’s, he’s going to be able to go. My guess is that the taxes he will pay on the higher income he will earn over his lifetime will FAR outweigh the cost to the state of subsidizing two years of higher education.

  17. I currently have $47,000 in student loan with interest rates and depending on if I pay $700 a month or $400 depends on if that loan amount becomes $105,000.

    I see a ton of wasted dollars on university campuses. Maybe a stpid observation but if often commented on how clean universities are when compared to hospitals. I’ve worked in hospitals for 20 yrs and the university rooms and bathrooms are so much cleaner and receive regular maintenance. Not to mention the constant construction on buildings and rooms. I spent a lot of time in the SPEA/business bldg during the time they spent a shit ton of money redoing all the bathrooms…bathrooms that were already in better shape than the ones at Riley. Simple analogy but one that I observed…especially when most of my teachers were considered adjunct and was paid around $1100 to $2000 to teach the class. Where is all the money going…if you have a class of 30 and that class costs a $1000 that is $30,000 for just that class.

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