Whether Student Debt Is $100K or $5K, We Still Need Reform

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Recent new reports have placed student loan debt under a microscope as President Barack Obama addresses the issue with the expansion of programs like “Pay As You Earn,” which caps loan payments at 10 percent of monthly earnings for some borrowers.

Over the past few years, we’ve heard several reports of students who are unable to find employment while they owe $50,000 to $100,000 in student debt. Accounts of waitresses, bartenders or retailer clerks with bachelor’s degrees and hefty student loans became fairly common during the recession, as the unemployment rate among recent college graduates hit 12.6 percent in 2011.

Upon hearing the stories and having some personal experience with the issue, either directly or indirectly, many Americans have come to agree that student loans are a cause for concern. The Washington Post published campaign polling results that indicate 87 percent of Democrats and 84 percent of Republicans are in favor of lowering student loan interest rates. While most people acknowledge the issue, a recent study attempts to downplay its severity.

Brookings Institution report

The Brookings Institution in June released a report analyzing the individual household’s student loan debt. The group based its report findings on data gathered from Survey of Consumer Finances (SCF) data, which analyze the finances of U.S. families every three years.

In the report, the Brookings Institution said: “College tuition and student debt levels have been increasing at a fast pace for at least two decades. These well-documented trends, coupled with an economy weakened by a major recession, have raised serious questions about whether the market for student debt is headed for a crisis, with many borrowers unable to repay their loans and taxpayers being forced to foot the bill. … Our analysis of more than two decades of data on the financial well-being of American households suggests that the reality of student loans may not be as dire as many commentators fear.”

The organization claims these reported debt levels of more than $100,000 are the exception rather than the rule, as only 4 percent of balances exceeded this mark in 2012. The report also claims the increase in student debtors’ income levels and total debt between 1992 and 2010 are such that the income increase could repay the debt in 2.4 years. The Institution used this and an abundance of other data to back its assertions, with the overall message remaining the same: The student loan crisis is not as serious as we think.

Using data from the Brookings report, the College Board, the Department of Labor, and other supplemental reports, we intend to provide an alternate point of view — that regardless of the level of individual debt, reform is still necessary.