Student Loan Usa Today – The amount of student debt in America is the size of the economy of Brazil or Australia. More than 45 million people have $1.6 trillion in debt, according to US government statistics.
This number has increased dramatically over the past 500 years as the cost of higher education has increased. Growth in prices is much higher than growth in other household incomes.
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The rising cost of college comes at a time when students are receiving less aid from the state, putting more pressure on students and families to take out loans to finance their education.
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State funding, which accounted for about 60 percent of higher education spending before the pandemic, has steadily declined, according to an Urban Institute analysis, down from about 70 percent in the 1970s.
State and local government spending on higher education is a declining share of higher education spending
To address the growing debt crisis, President Biden on Wednesday announced a plan to eliminate millions in student loans. As Mr. Biden said, it’s a way to fulfill a campaign promise to reduce a chronic problem that has plagued America for generations.
He said: “The burden is so heavy that even if you graduate you won’t have the middle-class life that a college degree once provided.”
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The average student with loan debt now graduates with nearly $25,000 in debt, according to a Department of Education analysis.
Under the plan, borrowers are eligible for $10,000 in loan repayments as long as they earn less than $125,000 a year, or in households with incomes below $250,000 (the amount will be assessed based on borrowers’ reported income in 2021 or 2020.)
Blacks increasingly burdened with student loan debt… Share of families and race with student debt
Source: Federal Reserve Notes: Black and white categories do not include people who identify as Hispanic. The data comes from the Federal Reserve Survey of Consumer Expenditures, which is conducted every three years.
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… as well as millennials, adults and young adults with more debt than total student loan debt by age
After the pandemic hit the world economy in 2020, President Trump announced a moratorium on student loans and forced interest rates to zero. Mr. Biden adopted the same principles. This move has helped millions of people reduce their debt and prevent lenders from defaulting on their loans.
However, there has been a significant increase in the number of people whose credit scores have remained the same or increased since the start of the pandemic.
The pandemic has reduced defaults, but the balance is still attractive.
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On Wednesday, Mr. Biden announced that the pandemic-period freeze on payments would end at the end of the year. He reiterated his commitment to help especially low and middle income families. How to do this is a matter of debate inside and outside the White House.
One of the features of the program includes an interest rate: loan assistance can be applied to individuals or families earning less than other incomes. According to the White House, the purpose of the system is to ensure that no one with high incomes benefits from aid.
An independent analysis by the Wharton Business School showed that households earning between $51,000 and $82,000 a year would see the biggest relief — regardless of whether income limits were used. Because many middle-income people have student loans.
Source: Wharton Budget Model household income from 2022. This analysis shows additional compensation for Pell Grant recipients.
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Millions of people have benefited from the relief, but Mr Biden’s announcement has sparked controversy over its merits.
On both sides of the political spectrum, experts and officials are concerned about the policy’s impact on inflation, as debt relief could boost the economy’s income. (White House economic advisers have suggested that by restarting debt repayments and consolidating revenues, the plan will keep consumer prices from rising.)
While the relief will help many people, some have argued that it won’t solve the core problems of college costs. Some financial experts warn that this could encourage colleges and universities to raise rates with the federal government.
“I understand that not everything I announce today is going to please everyone,” Biden said Wednesday. “But I believe my plan is fair and reasonable.”