Is this the end of student loan debt?
Not that any broke college kids will be surprised, but student loan debt is at an all time high. Throughout the years, it has become a habit, an expectation, a standard, and so commonplace that we can’t help but joke about what we would do if we didn’t have any student debt. It’s certainly a life-changing fantasy we have all thought about during particularly boring lectures.
But what if getting rid of student debt was more than a fantasy? Last week, Senator Elizabeth Warren laid out an ambitious plan to cancel student loan debt. One that would offer relief for at least 42 million Americans and cancel 640 billion dollars of the 1.5 trillion dollars in outstanding student debt.
Amazing! What else would this magical plan do?
According to Forbes, “Warren's plan for student loan debt forgiveness would:
Cancel $50,000 in student loan debt for every person with household income under $100,000.
Provide substantial debt cancellation for every person with household income between $100,000 and $250,000.
Make private student loan debt eligible for cancellation.
Streamline the student loan debt forgiveness process using data and income information already available to the federal government.”
Basically it would take you from piecing together funds to buy your next drunk Calios, to a real person who actually has a chance of making money out of college.
How would this student loan forgiveness proposal be funded?
For the most part the ‘ultra wealthy’ would pay for it. The Ultra-Millionaire Tax would levy a two percent annual tax on the 75,000 families in the U.S. who have at least $50 million in wealth. Also, an additional $100 billion would be invested in Pell Grants over the next ten years.
What are the benefits of student loan debt being cancelled?
It can drastically improve the economy. According to MarketWatch, over the ten years following the student loan debt cancellation, the GDP could increase by 86-108 billion dollars per year. Additionally, less debt would help the unemployment rate decrease by 0.22-0.36 percentage points.
It may be confusing to see how reducing debt could do all these things, but economic development is about building healthy economies in order to have healthy communities. As a result, economic development (and less debt) can support, maintain, and improve local infrastructures, provide higher wages, encourage businesses to stay domestic, reduce a region’s vulnerability to a single business sector, allow a region to be less dependent on intergovernmental influences and alliances, and overall improve the standard of living of people.
What are the consequences student loan debt is having right now?
People are often imprisoned by debt in their current lives. To put it into perspective, the average borrower has under 1,000 dollars in savings. Moreover, studies show that student debt has caused 19 percent of respondents to delay getting married, 26 percent to put off having children, and prevented 80 percent of borrowers from saving for retirement. Additionally, 56 percent refrained from buying a home, 42 percent from buying a car, and 50 percent from contributing to charity. Also, “... more than 85 percent said student loan debt was a major source of stress, and one in three said such debt is the biggest stress in their lives,” according to Forbes.
In these times, Americans are surviving instead of living; getting through each day like zombies. Getting married, having children, having a comfortable retirement, buying a home, buying a car, and contributing to charity are all things that make life meaningful. But when they are taken away, what is left?
If student debt is such a crisis, why is Syracuse raising its tuition costs?
The cost for the 2019-2020 school year will be 52,210 dollars—a 3.9 percent increase from 2018. This increase follows the one in 2018, which included an additional tuition premium as a part of the “Invest Syracuse” plan. Ultimately it’s about the school keeping up with current projects, starting new ones, and making more money.
What’s Invest Syracuse?
According to Syracuse University, “Over the next five years, Syracuse will invest $100 million to:
Redefine the student experience—at Syracuse, beyond Syracuse and after Syracuse as part of our alumni community.
Advance discovery and innovation by growing faculty research competitiveness; providing faculty, departments and schools the tools and support to deliver innovative teaching while conducting groundbreaking research; and expanding the University’s global research portfolio.
Expand opportunity to students of promise and talent, especially those from underrepresented and marginalized populations, across the socioeconomic spectrum.”
Is Syracuse’s plan worth it?
As far as we know, yes, because Syracuse claims that this money is invested in our experience and future at Syracuse University. However, it still leaves us scratching our heads about where all the other money goes and why general admission to a college like Syracuse University costs as much as it does.
Then why does college tuition continue to increase?
Many people blame high prices on unnecessary expenses or overpaid professors. But is that the truth? Over the last few decades, the amount of aid available to students has increased dramatically. But does that money actually offset the costs?
Take a student who receives 20,000 dollars from a college. With the increasing aid available he/she is also offered 1,000 dollars in Pell Grants. This college sees this, and realizes that next time they should only give the student 19,000 dollars instead, since federal aid will cover the rest. In the end, the college ends up paying less while the student pays the same.
By people expressing their rage about tuition costs to the federal government, additional financial aid has been given. However, as a result, colleges have increased their tuition or reduced the amount of scholarships they give out in order to keep making money. Hence, students are left at the mercy of universities everywhere.
Does increased federal aid help anyone?
Sure. Federal aid can sometimes provide massive help to low-income students and allow them to attend college. However, this leaves the middle class in a touch position. Because financial aid can only really cover the increased tuition costs for the very poor, these kinds of families tend to get left behind. And as college becomes more and more expensive, it becomes more and more difficult for them to afford general admission.
So, is Warren’s plan good for America?
We think it’s at least worth a shot. Although additional investments in Pell Grants may only increase tuition costs, the substantial debt cancellation could put an end to the student debt crisis and significantly help the middle class. If one thing is clear, it’s that something has to be done about this crisis, and this is the start we have been looking for.