Understanding the Student Debt Crisis & How We Got Here

As of 2019, over $1.5 trillion is owed in student loan debt in the U.S., more than credit card debt and car loans, and second only to mortgage loans. While the nation has seen a 23 percent increase in student loan debt over the last three years, student loan debt in Colorado has grown 176 percent since 2007, reaching $26.4 billion. This rapid escalation is a sign student debt has reached a crisis level. It’s the result of a series of pressures: greater need for credentialization, rising costs of higher education, and lack of enforcement of student borrowers’ protections under federal law.

Student debt is simultaneously an indicator and a catalyst for a plethora of issues facing Americans today. The student debt crisis lies at a critical intersection of multiple issues. Public investment in education, decent wages, and consumer protections are just a few of the components that must to be considered and accounted for in the pursuit of a solution.

Former CFPB student loan ombudsman Seth Frotman and multiple other sources have cited student loan debt as a driver of income inequality, racial inequality, and economic and racial segregation in the nation. The National Consumer Law Center (NCLC) asserts the financial security of older Americans is more at risk because of student debt. Experts are concerned this outstanding debt is keeping young people from buying homes, building equity, and even keeping them from starting families. These broad consequences show student loan debt isn’t “good debt,” but rather there are tradeoffs and long-term impacts for every stage of people’s lives.

Taking out a student loan is an easy, commonplace practice students and their families do based on assumptions about the value of an education, but it can result in devastating financial predicaments down the road. In fact, some experts say the larger system facilitating the borrowing of student loans is designed precisely to fail us.

In order to provide a foundational understanding of this topic, the Bell has put together a brief that explores the basic components of student debt, which include a timeline of student loan development, national and Colorado specific data, the essential features of student loans, and the ultimate problems with student debt.

This issue is a complex one; our Student Debt 101 brief isn’t meant to be exhaustive. Rather, this is an introduction to the basic parts in preparation for a more in-depth conversation on the complementary issues and solutions.

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