Student debt is continually in the headlines, and with good reason. In the U.S. alone, more than 44 million people owe $1.5 trillion in student debt, which averages to more than $34,000 per borrower.
The student debt crisis promises to be a focal issue in the 2020 presidential election, with Democratic presidential candidate Elizabeth Warren announcing her plan to cancel student debt for many borrowers. What do you need to know about this crisis? How can analytics help? Let’s take a look in today’s “Hot Topic” blog.
The data on the crushing weight of student debt
Student debt is now the second highest source of debt in the U.S. – behind mortgage debt, but higher than credit card debt. The average lender pays $393 per month towards his or her loans, and 11.4% of student loans go into default.
The student debt crisis is so dire for some individuals that a recent study says 1 in 15 student loan borrowers has considered suicide because of their student loans.
While many people say the student debt crisis is an “individual” crisis caused by people taking out too many loans, there are signs now that it could be impacting innovation. A recent article in Harvard Business Review indicates that overwhelming student debt could be impacting entrepreneurship among millennials. Research says that in 1996, young people launched 35% of startups. Today, that number is just 18%.
How government is working to mitigate the student debt crisis
There are various types of student debt forgiveness plans. Two of the most popular programs are the Public Service Loan Forgiveness Program and the Teacher Loan Forgiveness Program. However, critics of these programs say the criteria to qualify is stringent, and few applicants have actually had their loans forgiven.
States also have their own programs for loan forgiveness. For example, this article in the Wall Street Journal talks about various state programs and how 23 new state laws on loan forgiveness have gone into effect since 2015.
- Utah has various job fields where there is a shortage. The state will forgive 25% of a person’s loans for each year that person remains in the state and works in one of those fields.
- Texas has a loan forgiveness program for mental health professionals.
- Maryland has a program for farmers.
- Delaware forgives loans up to $10,000 for people teaching in high-need areas.
Many of the 2020 presidential candidates have been talking about their proposals to reduce the student debt burden.
- Elizabeth Warren recently announced her $1.25 trillion plan to eliminate most student debt and provide free tuition at state colleges.
- Bernie Sanders has also endorsed free tuition for students whose families earn less than $125,000 per year and would like to cut student loan interest rates in half.
- Beto O’Rourke has supported making college more affordable by refinancing student loans and increasing loan forgiveness programs.
- President Trump recently announced that he would like to consolidate repayment options and cap the number of loans students can take on.
- Here’s where many of the other 2020 candidates stand on student debt and college tuition.
It’s hard to make progress on the government front, though, when the issue becomes politicized. Outside of the political realm, are there ways to help with student debt?
How colleges can help borrowers with data
There are a lot of ways students can analyze data as they are making the decision on whether to take on debt, and a lot of ways colleges can help them in the process.
For example, students can examine their potential majors and career paths and assess whether or not the debt is worth it. The charts below from Credible.com show 1) the percentage of monthly income that degree holders spend paying back student loans; and 2) the median loan balance as a percentage of annual income. What’s surprising about these graphs is that many people in high-paying jobs have massive amounts of debt, so it’s not necessarily a matter of incurring high debt for low-paying jobs.
While students certainly have the burden of research to conduct before enrolling in certain programs, schools can help students out by providing guidance along the way and using data to examine their own offerings and making sure they are relevant. We outlined many ways in this blog post on student debt. They include:
- Making sure the curriculum is directly connected to the skills required for jobs students are preparing for.
- Bolstering certification programs instead of solely focusing on the four-year degree.
- Using analytics to better identify at-risk students and intervening earlier.
- Stepping in when there is a large disconnect between the debt a student is taking on and the intended career path.
Student debt is a growing problem in the U.S. that is deepening every day. While politicians are bringing to the table many ideas on debt and tuition reform, these ideas can be hard to put into action when the issue becomes politicized.
While there is no one solution to this issue, there are things both students and universities can do right now to better manage debt. It all starts with analyzing the data they have before them and making more informed decisions as a result.
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