Student debt has been a trillion dollar problem for at least six years.
Six years ago today, April 25, 2012, activists took to the streets to mark the country’s outstanding student loan debt exceeding $1 trillion. And in the years that followed, many of the trends that drove student debt levels to soar have persisted and, in some cases, worsened.
Focusing on the $1 trillion mark is somewhat “arbitrary” given that it doesn’t change the burden of debt individuals carry every day, said Mark Huelsman, senior policy analyst at Demos, a left-wing think tank. (Outstanding student debt hit $1 trillion during the second quarter of 2012, according to the Federal Reserve, which includes April.)
Still, Huelsman said these kinds of “big round numbers” can help galvanize people around the issue. “The increase in student debt really happened over a 20-year period,” he said.
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Various trends are fueling this growth. At the same time, the cost of college soared – partly due to state disinvestment in public higher education – a college degree became more necessary to earn a decent living. This means that as more and more people attend university, they rely more and more on debt to finance their education, which increases the level of overall student debt.
Slow wage growth and the rising cost of other necessities, such as childcare, also mean that families have less money to rely on to pay for their education. And once students leave college, these stagnant wages can prevent them from paying off their debt effectively.
“There are broader issues in the economy that show up in the student debt numbers,” Huelsman said. “But it’s also a set of deliberate policy choices that we’ve made at the federal or state level not to meet the growing demand with the investment that previous generations have received.”
Student Debt in America and the Hope for Affordable Education
According to some indicators, if student debt continues to rise, it could have a major impact on the economy. Although for many borrowers, especially those who have graduated from a decent college, student loans are a manageable investment in their education. Yet delinquency levels on student loans remain consistently high.
That’s concerning, especially since federal student loans offer many options for borrowers to stay current, Huelsman said. Borrower advocates said high levels of student loan delinquencies and defaults indicate that government-hired student loan companies are not doing enough to work in the best interests of borrowers.
“I often hear that big numbers aren’t necessarily what we should be worried about when it comes to student debt, but at some point it has to matter,” Huelsman said.
