The Student Debt Crisis: Are Things Getting Better or Worse?

The total amount of student loan debt has surpassed 1.2 trillion dollars, and growing by $2,726 every second.

The average student loan debt for a graduate in 2015 was $35,000.

11.8% of students defaulted on their loans last year. These are students that have not made a payment in 270 days. 

19.7% of students are more than 31 days late on a payment and are thus delinquent.


Does this sound like a student debt crisis? It depends who you ask.


A press release from the Department of Education highlighted some cause for optimism: Hardship deferrals, forbearances, defaults and delinquencies are all trending down. This seems to be mainly due to more and more students signing up for the many new income-driven repayment plans available.

Can Income Driven Repayment Plans Fix the Debt Crisis?

According to the press release, 4.6 million direct loan borrowers were enrolled in income-drive repayment plans in December 2015. This represents a 48% increase from the previous year.

Certainly it seems that offering an income-driven plan (especially one that offers debt forgiveness at a certain point) is preferable to having students default on their loans. But there are some downsides. For one, students will end up paying much more on the loan in interest than they would on a standard repayment plan. 

More importantly, while income-driven repayment plans may provide some temporary relief to cash-strapped college graduates, and allow the government to collect payment on their loans, it does little to address the root problem of the rapidly rising cost of college. In fact, it actually may encourage students to take on more loans than they would otherwise. 

A recent study has shown that easy access to loans actually drives up the cost of college. The law of supply and demand tells us colleges will keep raising their prices as long as they have students willing and able to pay. Easy access to student loans, and ever flexible arrangements for repaying massive debt burdens makes it very easy for colleges to continue to raise prices.

The Power of Education

As students are educated about the reality of student loans, interest rates, and the job market for their particular major, they’ll learn to make smarter decisions with their money. Choosing majors and colleges that are a good fit for them and make sense financially.

After all, an education is priceless, but you can receive a good education in a lot of different places, and in a lot of different formats. That’s why we encourage students to forgo one-size-fits-all rankings, take the mania out of college admissions, and prioritize fit over brand name.

As more and more students and parents become better educated about their options, colleges will be forced to change their ways. No more will students take on $80,000 of debt for a philosophy degree from a ritzy private school only to end up waiting tables. Some students may opt out of a traditional four-year degree altogether to pursue a trade, alternate form of education, or start their own business.

Better access to relevant data is the fastest and most sure way to begin changing the higher education industry.