Higher education used to be touted as the foolproof way to a middle-class lifestyle. But today, as millions stare down crippling college debt, Americans know better.
With President Biden’s most recent extension of the student loan payment and interest pause, the question remains: What’s next in addressing this issue?
Ideas from the liberal camp include total forgiveness of student debt or partial forgiveness, as well as free college. It may sound nice, but #CancelStudentDebt is a pipe dream. There is, however, one viable direction Biden could take. Namely, to set a cap on student loan interest accrual or overhaul student loan interest.
It is estimated that almost half of all borrowers’ debt balances are growing each month despite their payments being made. This is unsustainable, especially considering student loans have been non-dischargeable in bankruptcy since 1976.
Accruing interest is routinely identified by borrowers as the largest roadblock to paying down the principal amount. For many, monthly payments simply cover the interest accrued, and for some, not even that. This causes the principal loan to increase in dramatic fashion as capitalization occurs and the principal grows. Capping interest accrual or overhauling the interest system on student loans would be a strong first step toward solving the crisis.
The latest statistics indicate that the total student debt load in the United States is an astounding $1.71 trillion, with that amount held by just 45 million Americans — a more than 100% increase over the past 10 years alone. This equates to roughly $38,000 of student debt per borrower.
Unfortunately, it’s not a bubble the U.S. can burst without adding $1.71 trillion to the national deficit, or approximately $5,200 of additional debt per American. However, the Leveraging Opportunities for Americans Now (LOAN) Act proposed by Sen. Marco Rubio to eliminate interest on federal student loans would have a dramatic impact on student loan repayment. It would stop a large portion of the bleeding, especially for law, medical, and other advanced degree graduates with large debt loads.
This proposal would include a one-time “financing fee” at loan origination (based on a variety of factors) that would not increase and would be set for the life of the loan. Over the life of a loan, this fee would be substantially lower than the interest accrued at current rates, allowing graduates to map out their payment future and have more control and certainty regarding how much to pay, save, and budget.
However, all the solutions in the world will fall short unless they address one aspect of this crisis: the institutions themselves and their obscene tuition increases. The U.S. promises a better future for its children, but right now that future comes with an asterisk of non-dischargeable, life-altering, and often crippling debt. It’s time to work on removing that asterisk and strive to help those in pursuit of the American Dream.
Addison Hosner is a licensed Florida attorney and solo practitioner based in Fort Myers, FL. Addison holds a Juris Doctor degree. He is a Young Voices contributor.
