Student debt is at an all-time high in the US, and millions of Americans are reshaping their financial futures due to the student debt crisis. This is not just personal; it is systemic and tied to broader economic issues and government policies, especially those of the Trump administration.

State of the Economy

The US economy is growing but also highly vulnerable. Unemployment is low but wage stagnation and rising costs have many Americans financially insecure. Inflation is 3% and wage growth is not keeping up. Housing affordability has plummeted with median home prices up 30% since pre-pandemic levels and putting even more pressure on younger generations already burdened by student loans.

Despite good job reports, economic disparities are getting wider. According to the Wall Street Journal, nearly half of Americans would struggle with a $400 emergency expense. That’s how financially fragile households are, and student debt is worsening.

Trump Administration’s Impact on the Department of Education

Under the Trump Administration, the Department of Education was gutted, and policies were shifted that changed student debt management and education funding. Key initiatives included:

• Reduced regulatory oversight on for-profit colleges that were previously penalized for predatory lending.
• Rolled back student loan forgiveness programs for public servants.
• Reduced enforcement of regulations to protect students from fraudulent institutions.

According to the New York Times, the Department of Education cut staff by over 10%, which impacted oversight capacity. Critics argue this created an environment where students were left vulnerable to more debt with no protection or recourse.

Current State of Student Debt

Today student debt is $1.78 trillion and affects nearly 44 million Americans. The average debt per borrower is $37,500 and higher for graduate degrees. 40% of borrowers are at risk of default in the next 10 years.

• Types of Student Loans:
  • Federal Loans: 92% of total student loans. Subsidized and unsubsidized Direct Loans, Parent PLUS loans and Graduate PLUS loans. Subsidized loans for lower income students have decreased in availability.
  • Private Loans: 8% of total student debt. Higher interest rates and fewer borrower protections.
• Economic Class Breakdown:
  • Low income students rely more on loans to fund their education and have higher default rates and more financial insecurity. * Middle income borrowers have lots of debt and are struggling to pay but don’t have access to aid for lower income borrowers.
  • High income borrowers borrow more and for advanced degrees but have lower default rates because they have better repayment capacity.
• Grad vs Undergrad Debt:
  • Undergrad debt is around $30,000 per borrower.
  • Graduate school borrowers face higher average debt between $70,000 to $120,000 especially for medical, law and business students.
• Institutional Breakdown:
  • For-profit institutions have higher default rates due to questionable education quality and job placement outcomes.
  • Public universities have lower tuition but have seen increased borrowing due to declining state funding.
  • Private non-profit universities have higher average debt due to higher tuition but outcomes vary greatly depending on institution quality and student support systems.
• Borrower Outcomes:
  • Default rates are alarmingly high especially for those who attend for-profit schools or don’t finish their degree.
  • 25% of borrowers default or become delinquent within 5 years of entering repayment which damages their credit and economic mobility.

In-Depth Analysis: The Reality of Student Debt Crisis

Student debt impacts financial stability, economic mobility and overall quality of life:

• Delayed Milestones: Homeownership rates among millennials have plummeted and student debt is the main reason. This delay reduces overall economic growth and contributes to declining homeownership rates nationwide.
• Mental Health Consequences: A Pew Research study found 70% of borrowers experience significant stress and anxiety from their debt which affects productivity, employment stability and family life.
• Economic Growth Constraints: High levels of debt reduce consumer spending and limit economic growth as fewer people buy homes, cars or start families.
• Career Choices and Mobility: Debt burdens limit career options and push graduates into higher paying but less fulfilling jobs. This impacts critical sectors like education and healthcare which traditionally pay less.
• Racial Disparities: Black graduates have on average $25,000 more debt than white graduates. The debt gap grows over time due to accumulating interest and slower repayment capacity and deepens existing economic inequality.

Department of Education’s Role: Consequences of Reduced Oversight

The Department of Education under the Trump administration has made things worse:* Predatory Practices Are Back: For-profit colleges, once reined in, have rebounded and are now causing renewed problems of fraud and higher default rates among vulnerable populations. These institutions disproportionately target low-income and minority students.

• Loan Forgiveness Setbacks: Changes to the Public Service Loan Forgiveness (PSLF) program have resulted in a drastic decline in approvals. According to CNBC, less than 2% of PSLF applicants received forgiveness during Trump’s presidency compared to 15% previously.
• Fewer Investigators: Staffing cuts have reduced investigations into fraudulent practices by educational institutions leaving students with fewer protections and more financial risk.
• Weaker Consumer Protections: Regulatory rollbacks on borrower defense rules make it much harder for defrauded students to get debt relief.
• Less Accountability: Reduced oversight allows institutions with poor outcomes to continue to receive federal funding which indirectly promotes bad lending and higher default rates.

Long-Term Consequences of Student Debt Crises

The long-term consequences of unresolved student debt are dire:

• Less Wealth Accumulation: Borrowers can’t invest in homes or retirement savings and face long-term financial insecurity which limits wealth transfer between generations.
• Economic Drag: The Federal Reserve Bank of Philadelphia found significant negative impact on entrepreneurship rates directly tied to student debt burdens which stifles innovation and job creation.
• Lowered Retirement Savings: Many borrowers postpone retirement contributions due to debt repayment and potentially increase dependency on public welfare in the future.
• Slower Consumer Spending: High monthly loan payments reduce disposable income and negatively impact broader economic activity, retail sectors and small businesses.
• Increased Inequality: Student debt widens existing socioeconomic divides, disproportionately affecting low-income and minority communities and perpetuates poverty and limits social mobility.

Conclusion: What We Must Do

Student debt is a symptom of broader economic weaknesses and government failures. We need to act now and strategically. Rebuilding the Department of Education’s oversight and committing to structural reforms are key to getting out from under the weight of student debt.