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Cost of Inequity: The Student Loan Crisis

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Cost of Inequity: The Student Loan Crisis

Student loan debt in the U.S., now at $1.7T, impacts over 45 million Americans. As economic uncertainty continues to sway the financial prospects of millions burdened by student loan debt, hope garnered from the many campaign promises of 2020 has fluctuated from week to week. The student loan repayment freeze, prompted by the government's pandemic relief efforts, is now scheduled to end in August after several postponements by the Biden administration.

Cost of Inequity returns with this special edition on the student loan crisis, with stories, personal letters, and illustrations that examine historical events and systemic flaws in the student loan industry that have left marginalized and disenfranchised groups feeling cheated out of the American Dream. This series is part of a collection of stories investigating the origins and economic impacts of systemic inequities. Read more stories here.

Where we are now

More and more older student-loan borrowers will never be debt-free

Inside the scandal-ridden for-profit education industry, which churns out quick degrees and loads student-loan borrowers up with debt

More than 3 million parents took on student-loan debt to give their kids a shot at higher education — and it can bury them in huge monthly bills they never anticipated

The student-loan industry was created to give everyone an equal shot at the American Dream. The opposite happened.

Biden made it harder for student-loan borrowers to get rid of debt when they go bankrupt

How we got here

Following the Soviet Union's launch of the first Earth-orbiting satellite Sputnik, President Eisenhower realized that in order for the US to compete with other

nations, it needed to produce more scientists and engineers. At his request, Congress created the National Defense Education Act, which allowed the government to hand out student loans to those studying in the science and math fields. With that, the student-loan industry in the US was born.

President Lyndon B. Johnson took it a step further, envisioning a system where anyone who wanted it could access a higher education, regardless of race or income. Thus the Higher Education Act was signed into law, which guaranteed loans for the middle class.

Following the Higher Education Act's passage, banks began raising interest rates on student loans, and Congress created student-loan titan Sallie Mae, which ran up huge profits at the expense of student-loan borrowers. And that has only worsened, creating what is now a $1.7 trillion student debt crisis falling on 45 million Americans' shoulders.

Scroll through the timeline to see how a Cold War-era strategy sparked a national debt crisis over 60 years later and how the White House stance on student loans has evolved in recent years.

1958: At President Eisenhower's request, Congress created the National Defense Education Act, which allowed the government to hand out student loans to those studying in the science and math fields.

1965: President Lyndon B. Johnson signs the Higher Education Act into law, which guaranteed loans for the middle class.

1972: Congress created student-loan titan Sallie Mae, which ran up huge profits at the expense of student-loan borrowers.

March 2020: Biden wrote on Twitter that "we should forgive a minimum of $10,000/person of federal student loans, as proposed by Senator Warren and colleagues. Young people and other student debt holders bore the brunt of the last crisis. It shouldn't happen again."

November 2020: Biden said during a speech that forgiving $10,000 in student debt should be done "immediately."

January 2021: Biden extended the pause on student-loan payments for his first time through September 30.

February 2021: Biden said during a CNN town hall he was "prepared to write off the $10,000 debt but not $50 [thousand], because I don't think I have the authority to do it."

March 2021: Biden expanded the scope of the payment pause to apply to loans held under the Family Federal Education Loan (FFEL) program, which are privately held. He reversed a DeVos-era methodology to calculate loan forgiveness which had a 99% denial rate. He also canceled a total of $2.3 billion in student debt for defrauded borrowers and those with disabilities.

April 2021: Biden asked the Education Department to prepare a memo on his legal ability to cancel student debt broadly be executive action.

June 2021: Biden canceled $500 million in student debt for defrauded borrowers.

August 2021: Biden extended the pause on student-loan payments for his second time through January 31, 2022. He also canceled $1.1 billion in student debt for defrauded borrowers, $5.8 billion for borrowers with disabilities, and retroactively waived interest on student loans for 47,000 service members.

October 2021: Biden implemented reforms to the Public Service Loan Forgiveness program, bringing 550,000 borrowers closer to relief.

December 2021: Biden extended the pause on student-loan payments for his third time through May 1.

February 2022: Biden canceled $415 million in student debt for defrauded borrowers.

April 2022: Biden extended the pause on student-loan payments for his fourth time through August 31.

How do we fix this?

While the pressure has mounted on the White House to take decisive action on the student loan crisis, many politicians have voiced concerns over finding long-term solutions to higher education costs for future generations. Here is a roundup of proposals from legislators who have been the most outspoken on the issue, with a few highlighting temporary and permanent actions that could reform the institution beyond one-time forgiveness plans:

Republican Opposition

"President Biden and radical progressives have nothing to say to the thousands of students taking on education debt the day after forgiveness hits other than 'good luck.' Reckless loan forgiveness policies are a short-sighted answer that would crush American taxpayers and leave our higher education system more broken than before," GOP on House education committee said.

Republicans on House Education Committee

Zero Interest

Make all student loans interest-free

Extend pause on student-loan payments through December 31, 2022, permanently make student loans interest-free, consider federal seed money for low-income students looking to go to college, and increase incentives to employers to pay tuition costs for workers.

– Sen. Michael Bennet (D)

Allow borrowers to refinance to zero-percent interest through December 2024.

"That zero-percent benchmark will give financial breathing room to thousands of homeowners, small businesses and others, and it absolutely should—they need it. But so do working Americans with publicly held student loans who cannot refinance unless Congress changes the law. Student loan borrowers aren't only young people just entering the economy—they're moms and dads, small business owners, teachers and nurses, many of whom are trapped by law with legacy student loans with sky-high interest rates."

– Rep. Jeff Courtney (D)

10K Forgiveness

White House Proposal: Congress should pass a bill that Biden will sign to cancel $10,000 in student debt per borrower.

"If Congress sends him a bill, he's happy to sign it"... "They haven't sent him a bill on that yet."

– White House Press Secretary Jen Psaki

25K Forgiveness

Proposal: Legislation to allow the Education Secretary to cancel $25,000 in student debt per borrower.

"Republicans love to say that it's a freebie and you're giving things away, but this is a basic necessity for our economy and for us to be able to be globally competitive, and we need to start looking at human-capital investment the way we do at every other type of investment that we make in this country,"

– Rep. Vicente Gonzalez (D)

50K Forgiveness

Biden should cancel $50,000 in student debt by executive order

Supported by Elizabeth Warren, Chuck Schumer, Ayanna Pressley, Alma Adams, Ilhan Omar + dozens more colleagues listed here

"By canceling up to $50,000 in federal student loan debt for borrowers, President Biden can take the single most effective executive action available to provide a massive stimulus to our economy, help narrow the racial wealth gap, and lift this impossible burden off of tens of millions of families.

– Sen. Elizabeth Warren (D)

"I have been calling for at least $50,000. The president promised at least $10,000 during the campaign. So the number is somewhere in the midst of that… If you have the executive authority to cancel [$10,000 in student debt] you should have the executive authority to cancel [$50,000 in student debt]. And that would be an enormous boon to the economy."

– Congressional Progressive Caucus Chair Pramila Jayapal

Long-Term Fixes

Proposal: Extend the pause on payments until at least 2023 to implement permanent fixes to the student-loan system, including:

  • Place those who were in default back in good standing on their credit reports
  • Make income-driven repayment plans easier to access and cap monthly payments at no more than 10% of discretionary income
  • Extend the deadline for the Public Service Loan Forgiveness (PSLF) waiver that allows prior ineligible payments to count toward loan forgiveness
  • Forgive some student debt for all borrowers "while prioritizing those struggling the most."

"When I talk to student loan borrowers in Washington state, one thing is painfully clear: the student loan system is broken. It is ruining lives and holding people back. Borrowers are struggling with rising costs, struggling to get their feet back under them after public health and economic crises, and struggling with a broken student loan system—and all this is felt especially hard by borrowers of color."

– Sen. Patty Murray (D)

Who 'they' are

About 1 in 5 (or 45 million) Americans hold student loan debt. With such a large chunk of the population's financial future hanging in the balance, we wanted to hear personally from people struggling with student loan debt. Insider reporters reached out to our readers to get more details on how they are managing their student loan debt and hear their thoughts about possible reform in the future. Read their personal stories below:

It [student loan forgiveness] would allow us at middle age to pretend that we now have a chance at owning a home before we die. It would also be an acknowledgement that signing up 17 year olds to pay the governemt's bills for the rest of their lives was akin to child abuse.

Jeff Galfer

Actor, 42

I want more than anything to adopt, which is impossible when a third of my income is going towards loans. Having any amount forgiven, or even just the permanent elimination of interest, would make a massive difference in ability to have the children I wanted this career to support in the first place. Politicians keep quibbling between $10,000 and $50,000, but those of us drowning would give anything to be relieved of any amount at all.


Audiologist, 30

The changes in the student loan system over the years, including the 1990 goal to make it a profit center, did not align with falling wages, multiple recessions, sending jobs abroad to sweatshop countries and the rise in housing costs. Students have been signing up hoping education would put them ahead but the world pulled up the ladder as we tried. I graduated from law school in the Great Recession and at 9% interest from the government, not private loans, have never been able to afford payments that went to principal, so I can't out earn my loans, I just fall farther behind. Honestly $10K does nothing to help.

Mike Carlucci

Senior Data Analyst, 39

Dear President Biden,

Please give me $10,000 or more so that I can use it to make payments on my repayment plan for several years. $10,000 forgiveness won't impact me when I owe $130,000. I made $38,000/year the first three years after graduation. I was a teacher and am now a social worker. I'll never be able to buy a home—did I make a mistake in choosing my careers?

I would be mad that was the decision rather than forgiving more or all, proportionate to our debt.

Jordan B.

Social Worker, 40 years-old

"Student Loans are hitting my generation the hardest. We were promised that if we went to college and got good grades, our careers were guaranteed to flourish. The students bought in to that idea not predicting that the economy would be in a recession and inflation would rob millennials of our piece of the 'American Dream'. Being shackled to student debt has halted the growth of our country as most with student debt can't even dream about owning a car, buying a house, (and sometimes) having children, because paying off their debt comes before everything."

Allycia Watanabe, 32

Healthcare Business Analyst

What if student debt was cancelled?

Insider surveyed over 200 readers to learn more about how people are being impacted by student loan debt. We asked people of all age groups and backgrounds what they would do if some or all of their student loans were forgiven. Here's what they said:

  • About 24% of respondents said they would use the student loan forgiveness to buy a house or invest in improvements and repairs on their existing house.
  • About 11% of respondents said they would start a family or invest more money into their family's future.
  • About 2% of respondents said they would attend graduate school.
  • About 3.4% of respondents said they would buy a car.
  • A majority — about 51.7% — of respondents said that they would continue to pay


Series Editor: Ashley Davis

Editors: Bartie Scott, Lauren Frias

Design: Kazi Awal, Alyssa Powell

Social Producers: Kristie-Valerie Hoang, Claire Banderas

Reporters: Ayelet Sheffey, Erin Snodgrass, Taiyler Mitchell, Sarah Al-Arshani


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