The student debt crisis in the US scares a lot of us here in India. People weighed down by loans they took out to gain an education, unable to manage their expenses much later in life due to high interest rates sounds like a recipe for disaster. And while it took almost 10 years for the federal government in the US to take some action to address the issue, the annoucement made this week comes as a relief to millions of student loan debtors in the US. We take a look.
What is the value of student debt in the US?
US federal data suggests that 43 million Americans have pending student loans to be repaid. The total value amounts up to $1.6 trillion.
How do student loans impact people in the US?
The US spends only 4.96% of its Gross Domestic Produce on education, which is lower than the average of 5.59% invested by other developed countries. A gradual decrease in public funding for higher education institutions led to an increase in tuition fees charged. On the other hand, incomes remained largely stagnant for a majority of the population. This caused people to rely on public and private loan agencies to fund their educations. And high interest rates have ensured that students continue to repay these loans years after they graduate college.
Since when have people been demanding the cancellation of student debt in the US?
In 2012, student debt in the US surpassed $1 trillion. It was the time of the Occupy Wall Street protests against income inequality and the influence that money held over politics in the US. In the midst of these protests, voices emerged to cancel student debt and make education free and accessible. Over the years, the demand made its way into presidential debates and when Joe Biden ran for President in 2020, plans for student debt cancellation were voiced out at campaigns by him and other candidates from the Democratic party, including Senators Elizabeth Warren and Bernie Sanders.
What announcement did Biden make this week?
Two years into his tenure as the President of the US, Biden announced the cancellation of up to $10,000 of federal student loan debt for people who earn less than $125,000. For those who borrowed from the Pell grants that provide to the economically disadvantaged students, the amount forgiven per borrower was increased to $20,000. For those who volunteered to continue paying back the loans since March 2020, when debt collection was halted in light of the COVID-19 pandemic, the US goverment has offered a refund of the amount.
While reports suggest that the decision might wipe out all loans for over nine million people, activists say they will continue protesting and demanding a complete cancellation of all student debts.
