Solving America's student loan crisis


Adam Cecil

Adam Cecil

Former Staff Writer

Adam Cecil is a former staff writer for Policygenius, a digital insurance brokerage trying to make sense of insurance for consumers. He is a podcast producer, writer, and video maker based in Brooklyn, NY.

Published September 14, 2016 | 3 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

News article image

If you haven’t heard, America is in the midst of a student loan crisis. The total outstanding student loan debt has passed the $1.2 trillion mark, four-year college tuitions increased over 112% between 1990 and 2010, and the class of 2016 graduated with an average over $37,000 in student loan debt.No wonder some grads are going overseas in attempt to ditch their debt.In 2015, President Obama signed a "student aid bill of rights," a collection of policies and projects designed to make paying off student debt easier.Unfortunately, Obama's bill of rights is more reactive than proactive, dealing with debt after it’s already been dealt and doing little to prevent people from getting into debt in the first place.If we really want to solve the crisis, we'll have to think bigger and be proactive when it comes to new borrowers. While we may not be able to erase the $1 trillion in outstanding student loan debt, we can reverse the tide, and decrease future graduates' reliance on loans.So what’s the solution? Here are three suggestions:

Increase federal and state funding for public colleges.

As federal and state funding for public colleges went down, tuitions rose to cover those costs. Referred to as "the great cost shift" by Demos, a public policy organization, public colleges have failed on their promise to bring affordable higher education to the middle and lower class. We need a massive reinvestment into our public college systems in every state, with the goal being to lower tuition costs, lower the amount of federal loans needed, and eliminate private student loans from public colleges altogether.

Make income-based repayment plans the default.

Obama's 2012 expansion of income-based repayment plans is helpful, but it doesn't address the fact that most borrowers don't know that the plans exist. The best way to make sure that everyone is taking advantage of IBR plans? Make them the default plan for everyone who qualifies. (Check out our article explaining all of the current federal repayment plans.)

Don't start repayment until a graduate is earning over a certain limit.

Right now, borrowers have a six-month grace period after graduation before they have to start repaying student loans, regardless of whether or not they're earning any money. In this economy, there's no guarantee that borrowers will find work immediately after graduation. And putting the added burden of student loans on unemployed graduates just makes it more likely they'll get into deeper debt by missing their payments.

This is hardly a comprehensive list of ideas and proposals for fixing the student debt crisis. States such as Michigan and Oregon are looking at the feasibility of an idea called "Pay It Forward," which would allow students to go to public college for free. After that, each student would pay a percentage of their income back to the state that would both pay back their tuition costs and help pay for future students. Other lawmakers, like U.S. Senator Elizabeth Warren, have proposed laws that would allow all borrowers to refinance their student loans at today's lower interest rates.If you're interested in learning more about initiatives around student loan reform, check out Student Debt Crisis, a non-profit organization dedicated to raising awareness and campaigning for student loan reform.Image: Rochelle Nicole