Student debt relief might be on the way for nearly 45 million American borrowers.  Student debt was one of the critical points in the American Presidential election of 2020.  As a result, President-elect Joseph Biden and VP-elect Kamala Harris will feel obligated to do something about the dizzying student loan debt.   It has ballooned from a staggering $250 billion in 2004 to a mind-numbing $1.6 trillion in 2020.  The American middle class is more leveraged than ever before.  

 It is now the second-largest household expense after mortgages and a figure much higher than the credit card debt. It has been estimated that 45 million Americans have student debt to their names, which is almost one-eighth of the population. Given the staggering figure, it was bound to generate enough interest among the Presidential front runners and, more importantly,, the American middle class bearing the brunt of this vast expenditure. There is an increased clamor for immediate student debt relief, which has sent the government in motion into a tizzy.  

However, the pertinent question that one needs to ask is borrowing a rational decision. 

Why Borrow? 

A basic bachelor’s degree or even an associate degree pays off handsomely than the ones with only a high school diploma. The estimated difference is a million more, and hence borrowing for a bachelor’s or an associate degree makes sense. However, if one has to borrow for certificates that employers do not value, it is a mistake borrowing. This situation has been aggravated with the mushrooming of for-profit schools that provide certificates on Courses that may not have a viable job market currently.   This leads to a problem where the student ends up with an education that may not help them pay off their student loan. The decision to borrow becomes a millstone around the neck. 

This is the reason why it is essential to choose wisely and make an informed decision.  

The Past 

College education has always been a costly affair, something former President Barrack Obama fought to lower for the sake of the students and their parents.  His idea was to create, by 2020, the world’s largest pool of college graduates. To achieve this, he passed legislation whereby tax credits of up to $10000 would be passed on to the incumbent. The Pell Grant award was to be made widely available to make a college education affordable and universal. The sole aim of the reforms was to out-educate and out-perform the competition. The words, according to the former President, was that the real competition wasn’t between the Republicans and the Democrats but against talent from across the world in a dwindling job market. 

Higher education was no more a luxury but a prerequisite.  

He had also signed, in 2010, the Health Care and Education Reconciliation Act (HCERA), which would improve education affordability, access to quality education and help The United States of America, the world leader in higher education. The primary aim of shifting the Student’s aid system to the direct Loans program through the HCERA was to put an end to the wasteful subsidies provided to the banks and instead use the amount accrued through savings to strengthen the access to a college education. The Pell Grants award also increased from $4730 to $5500, and all these new changes were passed through the Budget Control Act of 2011. This act not only protects the new investments but will also deny any downsizing of the same in the coming future. 

With such an effort made to tame the veritable monster, the student loan debt currently stands at the crux of being called a crisis. As of today, it constitutes almost 10% of the nation’s GDP. 

The current scenario 

With such an effort in the past, what made the student’s loan debt an unbearable burden on the American Middle Class. In the words of the outgoing Trump administration official who was tasked to lead the student debt system, A. Wayne Johnson, “Fundamentally broken.” The only way this entire imbroglio can be overcome if the whole loan is forgiven, something that has been scoffed at.  

The American middle class takes it as an obligation to send their children to college. They do understand the importance of a college education. However, to do so, loans have to be taken since college education costs have gradually increased over the years as Mr. Johnson had rightly pointed out that the parents who aspire to send their children to college are often a victim to archaic ideas, unfathomable objectives, and promises which will never be fulfilled. 

The complexity of the finance complex 

The premise of the complexity that entices the American middle class is the idea of an investment. They portray the student loan as an investment that may work like a mutual fund. While this may be true, it only works out if the families have been able to keep aside enough funds to educate their wards. The 529 plans are the set of accounts where these families will be saving for their children’s future. However, studies have shown that less than 5% can save, and the rest are at the mercy of loans, which puts a strain on the already financially stretched families.  

There is also a wide demographic divide in those who do. It has been observed that the ones who save in those accounts are far wealthier than the ones who are not able to. There is also the uncertainty about the cost incurred across the many years of education. So even if a family has saved, it always remains a guessing game, and a pang of certain guilt is always at play. 

The FAFSA or Free Application for Federal Student Aid is the key to filing for aid. Critics of the student loan debt ecosystem have blamed FAFSA as one of the root causes of distress. It is a badly designed filling process, which illustrates how badly outdated and unrealistic its idea of a modern family is. 

It is also biased towards the wealthier families; it has been accused. However, when a family accepts the FAFSA, it is akin to living a life as per the whims and fancies of the Federal Government and their presumptuousness.  

Under such conditions, it has become an arduous task to look for Student debt relief. And the more it is delayed, the more the American middle class gets crushed under its sheer weight. 

With nuclear families breaking and students having to select the parent to live with, the burden of continuing education becomes greater. There are no provisions in the FAFSA that may reflect this reality. Estrangements, which are true in many American families, do not account for the payment capabilities of guardians, who might be aged grandparents, aunts, and uncles. The final FAFSA form is simply a cobbled up information sent to schools and colleges, which is often a distortion and does not portray the reality.  

Once the aid package has been extended, the students cannot loan from the Direct Loan Program. Hence, what was originally envisaged as a good loan and worked as an investment has now turned into an Achilles Heel. The high college fee and the affiliate costs surrounding education has dealt a hard blow on the very young minds the country wants to launch and build a secure future. 

End Result 

The objective was to create empowered young minds ready to take on the world. What the country gets instead is disgruntled souls unable to achieve their potential, earn less, provide less for retirement, and be dissatisfied with their work. Building a nation on the shoulders of children who are more focused on paying their student loans back is a tragedy; the forefathers were oblivious to it. It compromises the very aspirations of the American Middle class that these programs were designed to support. The dichotomy is saddening and has a direct bearing on the children’s future and the nation in extension. 

It is increasingly evident that the only way to counter this burgeoning mess is a bold stand that the Federal Government has to take. Legislations have to be passed and Acts enacted to free the national resources, in this case, the students, from future burdens. However, care also needs to be taken so as not to distress the borrowers too. The entire ecosystem of transactions has to be mended and transformed into a dynamic superstructure that will benefit not just the current generation but the future ones also. 

The options beforehand that the Federal Government have are: 

• All-encompassing forgiveness of all student loans 
• Forgiving a set limit of the loan 
• Former Pell recipients forgiven off their loans. 
• The repayment options to be reformed to stymie excessive interest rates 
• Transformation of the repayment option 
• Student loan refinancing as an option to be looked into 

These will need a sustained effort, and policies must be ideated to create an environment of positivity and vigor. The anxieties of both the borrowers and the lenders have to be kept in mind. 

Final Words 

The student loan debt is a crisis that has finally found its way into the people’s minds in charge. Being on top of the list for the American Presidential election 2020 means that the voice of the American middle is finally being heard. While nothing drastic can be expected as of now, but some provisions leading to student debt relief may be created.  

Debt is always a burden that derails many. It may end up as a curse, which shouldn’t be the case. The idea is to turn it into an investment for a better future. To that end, the Federal Government and the states and the education boards and banks need to put in their collective intellect and find a way out. Now is the time.  

Let the ball roll.