Introduction
Research papers are academic papers that students write to learn about a topic in depth and convey what they have learned. The goal of a research paper is to investigate a specific topic and analyze, evaluate, and synthesize sources to develop an original idea or conclusion about that topic. This paper will discuss the topic of student loan debt and its impact on recent college graduates.
Student Loan Debt in the United States
Student loan debt has been steadily rising in the United States for the past two decades. According to data from the Federal Reserve Bank of New York, total student loan debt outstanding reached $1.73 trillion at the end of the third quarter of 2021 (Federal Reserve Bank of New York, 2022). This level of debt exceeds other types of household debt such as auto loans and credit card debt. About 45 million Americans have student loans totaling more than their mortgages or car loans.
There are a few key reasons why student loan debt has ballooned over the past 20 years:
Rising costs of higher education: Both public and private college tuition and fees have increased much faster than inflation over the past few decades. Between the 1990-1991 academic year and 2020-2021 academic year, published tuition and fees at public four-year colleges increased roughly 210% beyond overall inflation according to the College Board. Private nonprofit four-year colleges experienced a similar increase of roughly 160% beyond overall inflation.
Declining state funding for public colleges: State funding for public colleges and universities declined sharply beginning in the late 1970s. According to the State Higher Education Executive Officers Association, state funding per full-time student declined by 23% from 2008-2018 after adjusting for inflation. As state money declined, colleges raised tuition to make up for the lost revenue.
Expansion of financial aid: Beginning in the 1990s, various policies like direct lending and income-based repayment plans expanded access to financial aid. While this helped many afford a college education, it also removed cost deterrents that existed when many families had to rely solely on savings, private loans, or part-time work to pay tuition.
Impact on Recent College Graduates
Carrying significant student loan debt can have considerable consequences for recent college graduates and young adults in their 20s and early 30s. Some of the major impacts include:
Housing and transportation: High student loan payments every month can make it difficult for young graduates to qualify for mortgages or auto loans needed to purchase a home or reliable vehicle. A 2020 National Association of Realtors survey found that 38% of non-homeowning millennials cited student loan debt as a major obstacle to homeownership.
Job changes and flexibility: Debt-ridden graduates may feel locked into their first job out of college rather than pursuing opportunities for career advancement or mobility. High monthly loan payments also reduce flexibility to take lower-paying jobs or periods of unpaid public service.
Family formation delays: High debt burdens are correlated with delays in major adult milestones like marriage, childrearing, and saving for retirement according to some research. A 2017 Federal Reserve study found student debt was associated with delays in homeownership, marriage, and even net worth accumulation among young householders.
Stress and mental health: Surveys by The Ohio State University and Student Loan Hero found student debt negatively impacts stress levels and mental health for many grads, especially those with debt loads over $30,000. Worry and anxiety over debt repayment dominated many respondents’ thoughts.
Default risks: While default rates remain relatively low, delinquency and default are increasingly concerning outcomes among debtors who accumulated debt from for-profit schools or who failed to complete degrees. A Brookings Institution study found default rates triple for students who drop out of college compared to those who graduate.
Policy Options and Considerations
Given the rising costs imposed by student debt on individuals and the overall economy, there is an active debate around ways to make college more affordable and ease the burden of existing student loan debt. Some argue policymakers should focus primarily on lowering the underlying costs that drive student borrowing through tuition reforms. Others believe more aid is warranted given the documented societal benefits of postsecondary education.
There are a mix of proposals under consideration at both the federal and state level, including:
Income-Based Repayment (IBR) plan expansions and revisions making loan forgiveness more attainable
Loan forgiveness programs targeted at public service workers, teachers, or based on income levels
Making community college free or debt-free for all students
Expanding Pell Grants for low-income students
Capping student loan interest rates
Allowing student loans to be discharged in bankruptcy (currently very difficult)
Incentivizing states to maintain funding levels for public higher education
Holding for-profit colleges more accountable if graduates default or do not find jobs
Requiring transparency around college costs, debt, and post-college outcomes
The costs of broad student debt cancellation or making all public higher education free are substantial and could run into the hundreds of billions of dollars annually depending on the policies. There are also ideologies opposed to using government funds to make higher education universally free or heavily subsidize career training programs that mostly benefit individuals. As the problem of student debt persists, these difficult trade-offs around costs, benefits, and societal responsibilities for education will remain at the forefront of policy debates.
Conclusion
Rising costs of college attendance and declining public funding sources have fueled a student debt crisis in the United States over the past couple decades. For many recent graduates, high loan balances are delaying major life milestones, limiting career options, and causing financial stress. While a variety of solutions have been proposed, there are substantial open questions around what level of government support or subsidization is appropriate given higher education’s clear private benefits as well as documented social and economic returns. As more young people struggle under growing student loan burdens, these issues will remain priorities for policymakers, researchers, and the public to address. Further research and debate is still needed to develop effective and pragmatic policy responses to this complex challenge facing the nation.
Andrew Stroud