American education week is a time to celebrate the concept of a free, quality education for all children and honor those who make it possible. Teachers and students in classrooms across the country will undoubtedly host parties, reflect on the difficult last year of teaching, and look to the future of education. And while it’s mostly K-12 institutions that will observe the holiday, they would be remiss to ignore the troubles plaguing postsecondary education.
The biggest such problem is our growing student loan crisis.
As of 2020, the United States boasted $1.57 trillion of outstanding student loan debt. If that was a country’s GDP, it would rank eleventh highest in the world. We racked up this outrageous figure by endorsing a predatory system reliant on the skyrocketing cost of higher education. This trend holds true across almost any period as well. For example, in 2002, average in-state and out-of-state tuition were $3,738 and $10,409, respectively. In 2022, those same costs are projected for $11,631 and $28,238. These are tuition increases of 211% and 171% over just 20 years.
College education is less affordable now than it ever has been. To finance such a tall task, families are turning to private and public student loans. This type of borrowing works like almost any other: The government or a private institution finance your education based on financial need, then ask for repayments when you graduate. On its face, it seems like a sensible solution to a growing problem.
But student loans often carry excessive interest rates.
During the pandemic, the federal government reduced interest rates to 0% in a bid to help those struggling financially. Outside of that once-in-a-lifetime effort, loan rates keep rising despite other economic activity. Fixed interest rates for private students loans can range from 3.34% to 14.99%, according to NerdWallet. The variable equivalent rates aren’t much of an improvement and can be anywhere from 1.04% to 12.94%. In short, student loans are riskier than other financial assistance, such as that accompanying a car purchase of mortgage.
This is a problem that disproportionately affects communities of color. Black graduate borrowers owe an average of $25,000 more than their white counterparts. Nearly 30% of that group make monthly payments of more than $350, leading to higher degrees of financial hardship among borrowers of color. Perhaps most astonishing is that Black bachelor’s degree-holders boast an average of $52,000 in student loan debt, far surpassing any other ethnicity.
While the raw figures paint a picture, all these disparities have real-life ramifications. A third of Hispanic borrowers report a strong hesitance to getting married and having children due to their loan debt. Almost 50% of Black borrowers said they were likely to put off buying a home. Similar numbers of Black loanees report working more than they would prefer. These impacts all contribute to a lesser quality of life and mental health for minorities, both of which have taken a toll during the pandemic more broadly.
A massive financial crisis becomes more likely every day. The federal government’s unwillingness to support student loan borrowers alongside the exploding cost of education have created an untenable environment for low-income families to break the cycle of poverty. It’s worth noting that all these troubles can be waved away by executive order, a central promise of Democratic candidates in 2020.
That is a promise on which we must demand action. College isn’t getting any more affordable and financial institutions are still willing to prey on low-income families. By holding our leaders accountable for their promises, we can destroy the crushing cycle of poverty that plagues communities of color.
