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Student debt refers to the debt incurred by an individual to pay for education-related expenses. This debt is most commonly assumed to pay for tertiary education, such as university.
The amount loaned or the loan agreement is often referred to as a student loan . In many countries, student loans work differently compared to with differing laws governing renegotiation and bankruptcy. As with most other types of debt, student debt may be considered defaulted after a given period of no response to requests by the school or the lender for information, payment, or negotiation. Afterward, the debt is turned over to a student loan guarantor or a collection agency.
In August 2017, Finland saw student loan drawdowns double to €143 million from August 2016 as a result of being able to borrow €650 a month from the previous €400 a month. The reform for financial aid resulted in students who qualify for government-guaranteed loans increasing by over 60%.
There is concern about possible changes in government policy forcing graduates to pay back more. Could tuition fees really cost £54,000? BBC The Institute for Fiscal Studies claims that 75% of graduates will never repay all their debts. Tuition fees should be scrapped, says 'architect' of fees Andrew Adonis The Guardian According to economist Sebastian Burnside, student debt is the fastest-growing type of borrowing and is rapidly becoming economically significant. UK student loan debt soars to more than £100bn The Guardian
In 2015, Central Saint Martins student Brooke Purvis announced that he would burn his student loan as a form of protest art, raising awareness about student debt. It is argued that the artwork addresses the subject matter of the materialism of money and brings to light the political issues of the U.K student loan system.
During the Reagan presidency student debt increased, and following the Great Recession climbed significantly as states slashed public funding for higher education. By comparison, as late as the 1960s, student debt did not significantly impact American life.
In 2018, a total of 44.2 million borrowers owed a total of over $1.5 trillion in student debt. In addition to more borrowers and the total amount owed having more than doubled (up 250%) from $600 billion to $1.5 trillion in 10 years, according to Forbes Magazine, the rate of delinquency greater than 90 days, or default, has doubled to over 11% nationwide, according to the Federal Reserve. A report by the Brookings Institution warned that the student loan default rate could reach nearly 40 percent by 2023.
In 2019, Theresa Sweet and other student loan debtors filed a claim against the United States Department of Education, arguing that they had been defrauded by their colleges. The debtors filed under a rule known as Borrower Defense to Repayment. In November 2022, federal judge William Alsup ruled for immediate relief for about 200,000 student debtors, and in April 2023 US Supreme Justice Elena Kagan declined to grant emergency relief to three for-profit colleges.
The interest rates are a major factor in the alarming debt numbers; however, the booming prices of college are another major factor in the tremendous student debt in the US. The public universities increased their fees by a total of 27% over the five years ending in 2012, or 20% adjusted for inflation. Public university students paid an average of almost $8,400 annually for in-state tuition, with out-of-state students paying more than $19,000. For two decades ending in 2012, college costs rose 1.6% more than inflation each year. Government funding per student fell by 27% between 2007 and 2012. Student enrollments rose from 15.2 million in 1999 to 20.4 million in 2011, but have fallen each year since 2010–2011. Bloomberg reported in July 2014 that "The biggest growth in the program came in the past decade, as student debt rose an average of 14 percent a year, to $966 billion in 2012 from $364 billion in 2004, according to New York Fed data."
Student loan borrowers that attended a for-profit and two-year community colleges earn low annual salaries, an average of $22,000 for people withdrawing from schools as of 2010. This means that these people have trouble paying back their loans. The new evidence is reliable with the previous data. For example, the statistics show that default rates are essentially lower within the demographic of borrowers with large loans than within borrowers with small loans. However, the new evidence, which goes back twenty years, shows how much the scenery of borrowing has changed. Currently, most borrowers are older and attended a for-profit or two year community college. About ten years ago, the standard borrower was an established student at a four-year university.
In January 2019, the Federal Reserve said that student loan debt has more than doubled in the last decade, and is forcing many in the millennial generation to delay buying homes. A 2019 survey by Bankrate found that student loan debt is also forcing millennials to delay other financial and life milestones, such as building emergency savings, saving for retirement, or paying off other debts. Beth Akers, a senior fellow at the Manhattan Institute for Policy Research, points out that 66% of millennials have no college debt; most of whom do have debt proportional to their income; and that for those who drop out or fail to get a high-income job after getting an expensive degree, there are government programs that limit payments to a reasonable percentage of income and that forgive loans after 10–20 years if they cannot be repaid.
In April 2012, student loan debt reached US$1 trillion. The severity of the student debt burden represents such a threat to the middle class that some have demanded a general bailout. Anthropologist David Graeber, author of , argues that student debt is "destroying the imagination of youth" and says, "If there’s a way of a society committing mass suicide, what better way than to take all the youngest, most energetic, creative, and joyous people in the society and saddle them with, like, $50,000 of debt so they have to be slaves? There goes the music. There goes the culture. There goes everything new that pops out. And in a way, this is what’s happened to our society. We’re a society that has lost any ability to incorporate interesting, creative and eccentric people." David Graeber: ‘There Has Been a War on the Human Imagination’ . Truthdig. Retrieved November 16, 2014.
On November 12, 2015, students organized rallies at more than 100 college campuses across the United States to protest crippling student loan debt and to advocate for tuition-free higher education at public colleges and universities. The demonstrations took place just days after fast food workers went on strike for a minimum wage of $15 an hour and Labor rights. Students across US march over debt, free public college . Al Jazeera America. November 12, 2015.
A February 2018 research paper from the Levy Economics Institute of Bard College argues that government cancellation student debt in the United States would result in rising consumer demand, along with economic growth and increased employment. Over the following decade, the GDP would increase by between $86 billion and $108 billion annually, which would result in an increase of between 1.2 and 1.5 million jobs and a decreased unemployment rate of 0.22 to 0.36 percent.
In April 2019, Elizabeth Warren, a U.S. Senator from Massachusetts seeking the nomination in the 2020 Democratic Party presidential primaries, added a proposal to her presidential platform to cancel student debt and make public colleges tuition-free. In June 2019, U.S. Senator from Vermont Bernie Sanders, who was also seeking the 2020 Democratic nomination, offered a plan for the cancellation of all 1.8 trillion in outstanding student loan debt which would be paid for with a tax on Wall Street speculation.
According to a Hill-HarrisX poll, 58% of registered voters are in favor of making public colleges tuition free and also support abolishing all outstanding student loan debt.
It was revealed in September 2019 that the U.S. Army is using the student debt crisis to boost recruitment, moreso than the ongoing conflicts it is engaged in, and because of this exceeded its recruitment goals. The Head of Army Recruiting Command, Maj. Gen. Frank Muth, said that "One of the national crises right now is student loans, so $31,000 is about the average. They can get out of after four years, 100 percent paid for state college anywhere in the United States."
Some studies have shown that student debt can have significant effects on a student's mental health and attitude towards education. These effects include feelings of anxiety, nervousness, and tension, as well as difficulty sleeping and worry about criticism from peers. Student debt and these feelings associated with it have also been shown to negatively impact the student's academic performance.
In a video report from libertarian Reason magazine, analyst Emma Camp assessed the impact of outright debt forgiveness and concluded that inequities exist in abolishing all student debt outright as opposed to allowing individuals most in dire need to declare bankruptcy and relieve themselves of student debts that they find themselves to be unable to pay back. Camp argues that wholesale debt forgiveness would instead exacerbate inflation and worsen the economy in the United States in particular, or anywhere that such indiscriminate debt forgiveness were to take place.
In April 2024, the Biden administration initiated the forgiveness of $7.4 billion in student loan debt for 277,000 borrowers, as part of its broader strategy to address the issue. This action added to the $153 billion already forgiven for nearly 4.3 million individuals, reflecting the administration's ongoing efforts in tackling student loan debt.
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