Students Must Prepare for Loan Repayment
The pause on student loan payments will now end “60 days after June 30,” or around Sept. 1, per the agreement between House Speaker Kevin McCarthy (R-CA) and President Joe Biden to raise the debt ceiling. With the ending of this pause, interest will once more begin to accrue on these loans. Interest has been one of the key drivers of surging student loan balances. When accrued interest is added to the original loan balance, future interest can increase, adding to the debt holder’s burden.
As background, the amount of student debt nationwide is a staggering $1.75 trillion, 92% of which is from the Federal student loan program. $500 billion of this is owed by borrowers between 25 to 34, with amounts ranging between $10,000 and $40,000 per student. $620 billion is owed by Americans between 35 and 49. Student debt even follows borrowers into their senior years, with 2.4 million borrowers 62 and older on the hook for $98 billion.
Looking specifically at North Carolina, in 2022 over one million North Carolinians owed $49.2 billion (8th in the nation) in Federal student loan debt, with an average per borrower amount of $37,721. This debt load severely limits the ability of North Carolinians to buy a home, provide for their families, or invest for retirement. Nationwide, graduate students face an average balance of $102,913.
Debt relief is a particularly urgent for women and people of color. In fact, women account almost 2/3 of student loan debt, despite earning less than men. After graduation from university, three-fourths of African Americans earn 23% less than the national median income, making their ability to repay their debt more difficult than their non-minority peers.
Federal student loan programs were meant to level the playing field and to allow all Americans access to both quality undergraduate and graduate education and the economic benefits that accrue from higher education. And although these programs have achieved their objective of providing those with modest family incomes with access to higher education, they have saddled many students with hefty debt, as state funding for public universities has fallen and tuition costs have escalated across the country.
According to a November 2021 report from Georgetown University, the cost of college has increased by 169% since 1980, while pay for young workers has only grown by 19%. This staggering difference is the prime reason why the types of programs introduced by President Biden, which follow the lead set by other developed countries, are essential. Think about it: no politician argues when asked to bail out a state or a region following a natural disaster. And over the past three decades, FEMA has spent $347 billion (in 2022 dollars) from the Disaster Relief Fund to respond to fires, floods, hurricanes, tornadoes…while the student loan crisis has itself reached true disaster levels.
President Biden’s proposal that citizens who received a Federal Pell Grant are eligible for student loan debt cancellation up to $20,000 is a good start. Others can receive as much as $10,000 off their student loan debt. This cancellation would be transformative and consistent with the purpose of the student loan program—ensuring the American Dream is within the reach of all.
The Supreme Court could, however, overturn this proposal with a potential ruling in June. If the Court does nullify President Biden’s efforts to erase the debt of 44 million borrowers, it would deepen income inequities in America. If that happens, North Carolina Democrats and Democrats across the country must work to overcome Republican opposition to debt forgiveness programs. If we can’t, higher education will exist only for the elite.
FACT SHEET: Biden-Harris Administration Releases New Data Showing 26 Million People in All 50 States Applied or Were Automatically Eligible for One-Time Student Debt Relief