In 2012, Americans learned an inconvenient truth—outstanding student debt crossed the trillion dollar mark, and millions of borrowers were in default. On the heels of the Great Recession, many Americans began to ask, “could this be the next crisis?” Policymakers and advocates increased their attention on the impact of heavy student debt burdens, and President Obama called upon Congress to act. Yet by 2016, student debt continues to climb and millions more have defaulted, with no solution in sight at the federal level from a gridlocked Congress.
With student debt burdens worsening and the federal government sitting on the sidelines, community and political leaders have started to fill the void, exploring their options to stop the negative consequences of student debt from impacting their cities, counties, and states. In this paper, we outline a portfolio of policy options for state and local leaders can pursue to mitigate the effects of student debt. We also offer solutions to address the root causes of the crisis: cost and accountability for institutions and lenders.
Forty-three million people in the United States owe some amount of student loan debt. Exceeding $1.3 trillion, the total student debt in the U.S. surpasses both the amount of credit card debt and car loans. However, this figure is an underestimate of debt caused by higher education, because for many families, home equity loans and credit cards have become an important part of financing college.
Because the true amount of debt associated with education held by students and families is underestimated by available data, the growth of the student debt crisis shown by existing data is especially alarming. The overall amount of student loan debt is growing, but the problem is worsening for individual borrowers, too. Students are graduating with increasing amounts of debt each year. Seven in 10 college seniors obtaining a bachelor’s degree in the class of 2014 graduated with debt, and carried an average debt of $28,950.
The student debt crisis is widespread and continues to worsen. However, despite the national scale of the issue, local- and state-based solutions can provide significant relief for Americans drowning in student debt.