Borrowers and balances
In the United States, young and middle-aged adults hold the majority of student loan debt. Borrowers aged 35 to 49 had the most outstanding student debt as of Q1 2023, owing over 620 billion U.S. dollars, followed by borrowers aged 25 to 34 who owed almost 500 billion. Due to accruing interest, however, some Americans may remain saddled with student debt even up to retirement. Borrowers aged 62 and older are more likely to carry higher debt balances, averaging almost 50,000 U.S. dollars per borrower. Attending a private university, particularly a for-profit institution, is also likely to lead to larger debt balances as public colleges tend to be cheaper. Similarly, obtaining a graduate or professional degree may incur a high debt, however, this may be easier to pay off with increases in income. Studies show that smaller amounts of student debt held by younger Americans with limited resources are often the most difficult to pay off, as they tend to face significant financial complications resulting from loan repayments; around a quarter of Gen Z in 2022 were unable to save for retirement or emergencies and had to delay home ownership due to student debt.
Some young people also struggle more than others; due to decades of discrimination, women and people of color typically take on more student debt – and have higher balances – than White men. Black women in particular bear a heavy burden; in 2022, over 43 percent of Black women who attended at least some college carried a student loan balance, more than any other demographic group. According to the U.S. Department of Education, Black graduates were also the only racial group to owe more student debt than they originally borrowed after four years of finishing a bachelor’s degree, reflecting the fact that Black Americans still earn less, even with the same education, and face an inequitable job market after graduation. Those who do not graduate face additional risks, as borrowers without a degree are most likely to default on their student loans, meaning they missed multiple payments at the risk of financial consequences, followed by low-income borrowers and Black borrowers respectively.
A legal battle to federal loan forgiveness
To combat financial hardships and disparities from soaring student debt, President Biden aimed to provide relief through federal student loan forgiveness. As of April 2023, an average amount of 21,347 U.S. dollars had been forgiven for borrowers who met certain eligibility requirements, such as working for a public service employer or having been declared permanently disabled, through targeted programs. In August 2023, the Biden administration also announced a debt relief proposal called Saving on a Valuable Education (SAVE), an income-driven repayment plan to lower monthly payments, eliminate minimum payments, and remove accruing unpaid interest for borrowers who keep up with payments. Under the SAVE plan, borrowers with a balance of 12,000 U.S. dollars or less who have made payments for at least 10 years will have their loans forgiven, providing relief for those who need it most. However, Republican lawmakers maintain that forgiving student loans on a larger scale is an abuse of executive authority. In addition, critics raise concerns that taxpayers who have already paid off their student loans or never had them in the first place will be unfairly forced to bear the cost of student debt, arguing that student loan forgiveness neglects to address the real problem of overpriced colleges.
Although most Americans agree that both the rising cost of college and the existing volume of loans need to be addressed, debates remain over the appropriate level of federal involvement. In 2022, 38 percent of Americans agreed that student loan debt should be cancelled for everyone while 27 percent believed that the government should help with repayment options instead. In that same year, 33 percent of Americans who had never had student loans indicated support for forgiving up to 10,000 U.S. dollars for lower-income Americans even if it would raise their taxes. However, support for this plan fell significantly if forgiveness would encourage colleges to increase costs or if more employers would require college degrees unnecessarily, suggesting that federal student loan forgiveness may gain more support if combined with plans to place accountability on colleges and employers. As surging student debt prevents younger generations from achieving their goals and aspirations and raises doubts on whether the benefits of higher education still exceed the costs, finding a way out of this debt crisis may be crucial to ensure that Americans continue to benefit from an educated and successful society.
