NICK EICHER, HOST: The student debt crisis has become a hot topic for Democratic presidential hopefuls. Several candidates support the free college plan popularized by Bernie Sanders in 2016.
Frontrunner Joe Biden is one of them. Elizabeth Warren is another.
But Warren wants to take it a step further. Here she is explaining how during a recent CNN town hall.
WARREN: We are going to roll back student loan debt for about 95 percent of students who have debt. This is about opportunity for everyone. [clapping]
MARY REICHARD, HOST: Warren’s massive plan to do this is going to cost more than a trillion dollars. Trillion with a “T.” Despite that price tag, a recent poll found a majority of registered voters in favor of the idea. But who would actually benefit?
Here’s WORLD Radio’s Leigh Jones.
LEIGH JONES, REPORTER: Student loan debt in the U.S. now totals about $1.5 trillion. It’s second only to mortgage debt when it comes to consumer lending.
And for at least the last decade, media reports and politicians have described it as a national crisis.
Joanna Smith-Ramani studies financial security at the Aspen Institute.
SMITH-RAMANI: There’s varying opinions on this by economists, but really smart research from very credible places like the Federal Reserve say student loan debt is now impeding homeownership rates. It’s impeding small business formation. You know, it’s impeding big economic drivers of our country.
But student loan debt affects a relatively small number of Americans—just over 13 percent.
Beth Akers studies higher education finance at the Manhattan Institute. She believes the crisis storyline is overblown.
AKERS: I think the narrative about higher education and higher ed finance has largely been that college is just grossly too expensive, and that anybody who is borrowing to pay for a degree is going to find themselves sort of up a creek without a paddle. And I think that’s really not an accurate depiction of what’s happening.
Akers says that while some students do find themselves with crushing amounts of debt, they’re not in the majority.
AKERS: So a lot of people are borrowing to pay for college but making really good investments in themselves and their skills. And then they go on to get high-paying jobs in the fields that they’ve planned to work in. And it more than compensates for the amount that they had to borrow to pay for their degree.
Recent graduates owe an average of about $29,000. And they spend about 4 percent of their monthly income on loan repayments. That percentage hasn’t changed since the early 1990s, when students borrowed less but also made less when they graduated.
So why don’t we hear more about that? Because, Akers says, it doesn’t make for very exciting headlines.
AKERS: I think that the media has done a great job of spotlighting the issues that the small number of struggling borrowers are facing. And that’s because that really makes for a good story to be honest. Um, you know, there was coverage recently of a dentist who had $1 million in student loan debt and that’s a story that everyone wants to read.
It’s also a story that resonates with many young political staffers who went to elite, expensive, universities. And they’re the ones framing the issue in Washington.
Lanae Erickson studies social policy and politics at the center-left think tank Third Way.
ERICKSON: Those are the people who knock doors for the campaigns and are super engaged at this point in the process. So they’re unrepresentative of the country and they drive the debate in a way that’s sometimes not helpful when you’re actually thinking about what would help the greatest number of Americans.
Erickson notes that any widespread cancellation of debt will actually benefit those who need it the least.
ERICKSON: A third of the student debt is held by people in the top quarter of the income bracket. And that means if you are forgiving that debt, you are giving them more money than you’re giving anyone else across the income spectrum.
But that doesn’t mean no one needs help. And Akers, Erickson, and Smith-Ramani all agree on this. They say students who took out debt but never got their degree could legitimately benefit from government assistance.
SMITH-RAMANI: And the borrowers that are in the most trouble in fact are people who owe under $10,000 on average who did not finish the whatever kind of degree program they were going towards. And so what they’ve done is spent this money that actually hasn’t helped them in the labor market place.
Smith-Ramani is hopeful lawmakers will find a way to ease the burden on some student loan borrowers before the 2020 election.
SMITH-RAMANI: Where there’s a lot of bipartisan excitement and agreement is really around the income driven repayment plans, which I think is probably part of any, you know, short term, reasonable solution. Um, and probably long-term as well.
Erickson also notes the College Transparency Act is gaining bipartisan support. It would make colleges track and provide data on student outcomes, including post-graduation earnings.
ERICKSON: Because I think for everyone across the ideological spectrum, giving people more information about where, which programs might pay off seems like a good idea.
Reporting for WORLD Radio, I’m Leigh Jones.