Student Debt

Student loan debt is an increasingly hot topic as the amount of student loan debt increases year after year.  Lawmakers, policy experts, students, and families are all looking at the issue and determining how it should be addressed. Here are the facts:  

Contrary to public perception, it is not the students with the largest loans who are unable to repay them.  Very large loans are most often taken out for professional degrees and are repaid because the borrowers have higher incomes upon graduation. Rather, the borrowers who experience the most difficulty repaying their loans commonly have small (under $5,000) loan balances, and did not complete a certificate or degree program.    

Numerous press accounts suggest that student debt results in borrowers’ delaying important life activities, such as starting families and buying homes. This question requires further exploration, but research by Beth Akers, then of the Brookings Institution, suggested no long-term negative effect.  

The Department of Education reported in September 2020, that average 3-year overall cohort default rates for 2017 decreased slightly from the three prior years to 9.7%.  It remains to be seen if this is a long-term trend—as the economic recovery and the growth in alternative repayment options may have played a role.  


The issue of student loan debt has captured significant public and press attention. That student loan borrowing has reached $1.7 trillion, surpassing credit card debt, is note-worthy and should not be ignored.  However, although individual borrowing has increased, the total amount of borrowing has also been driven by the increase in the number of borrowers who returned to college or needed assistance during the Great Recession, and by a growing number of graduate students. 

Policy Questions

The attention being given to student debt levels has prompted a variety of policy responses—including proposals related to federal loan limits, the provision and timing of loan subsidies, repayment options., and the cancellation of student loan debt.

Loan limits:  There have been Higher Education Act (HEA) reauthorization proposals to reduce federal loan limits that would potentially force many students into more expensive private loans.  

In-school interest subsidies:  Proposals to charge low-income students interest while they are in school would cost students thousands of dollars in a program in which the federal government is already making a profit.  There is a growing debate about whether it is better to direct loan subsidies more on the front end, based on students’ family income, or the back end, based on debt loads and earnings after students graduate.    

Repayment options:  The major efforts to reduce the burden of repayment have been on the back end of the process, i.e., the creation of repayment systems that are based on borrowers’ income and loan forgiveness for public service.  Currently, borrowers have a vast number of repayment options that tend to be quite confusing to the borrower.  There have been proposals to simplify repayment options for borrowers and create more favorable terms and conditions.  Some policy makers argue that institutions should have the ability to limit student borrowing if they are to be held liable for high cohort default rates through risk-sharing

Student debt cancellation: There have been proposals to forgive upwards of $50,000 of student loan debt for all borrowers while others have called on debt forgiveness of $10,000 for all borrowers. As Congress has considered this issue, bills have been introduced that would forgive $10,000 in federal and private student loan debt for economically distressed borrowers, but this remains a topic of debate.

What You Can Do 

  • Know how much your students are borrowing.
  • Evaluate your entrance and exit counseling efforts to encourage students to borrow wisely, and be vigilant in understanding repayment requirements (particularly those related to annual renewal requirements for income-driven repayment options).
  • Let your Senators and Representative know of your support for efforts to:

    * Encourage on-time completion;
    * Maintain clear and reasonable repayment options.
    * Protect the in-school interest subsidy; and
    * Keep interest rates and fees low;


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