The student debt crisis in the United States has reached new heights. Student debt hit a record $1.31 trillion last year, marking the 18th consecutive year of increases, according to a report from the Federal Reserve Bank of New York.
The New York Fed has only tracked this debt for 18 years, but only upward trends have been observed thus far. The final quarter of 2016 saw a $31 billion increase in the outstanding student loan debt balance.
Despite the certainty from the New York Fed, some data sources report different numbers, but for obvious reasons. The report from the Federal loan portfolio itself pegs the total at $1.29 trillion, $20 billion less than the New York Fed figure. This difference most likely represents private student loan debt which saw significant increases since the financial crisis.
Student loans have doubled since 2009, nearly topping the list of all types of household debt gains in that same period. The only form of debt that surpasses student loans is mortgage debt which is still far ahead at $8.5 trillion.
With all this in mind, it is no surprise that student debt became a heated political issue.
Former President Barack Obama’s administration warned that mounting student debt could hamper the economy. In an attempt to fix that problem, he implemented the first Income-Driven Repayment program in 2014. Borrowers could pay 10% of their discretionary income and be eligible for forgiveness after 20 years, beginning in 2015.
Other agendas surfaced during the 2016 election. Some of them more progressive than others.
During President Trump’s campaign last year, Trump proposed to streamline all income-based repayment programs into one plan so borrowers would pay 12.5% of their discretionary income for 15 years before being eligible for loan forgiveness. This would expedite repayment, albeit making it harder. Other speculations included the privatization of student loans, removing the Federal government from the equation.
Another popular agenda came from Bernie Sanders who proposed free public college at a heavy expense to taxpayers (S. 1373). Hillary Clinton attempted to appeal to the tech startup industry by offering extended deferment on student loan payments after graduation, provided that the borrower was starting a business.
At any rate, Donald Trump won the election. Since Trump has not yet finalized his plans with student debt, only time will tell if the government will be able to make a dent in student debt, or at least stunt its growth.
Author: Andrew Rombach
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