Annelise Capossela for NPR
Borrowers have spent much of 2025 trying to keep up with dizzying changes to the federal student loan system. The Trump administration and Congress are in the process of overhauling everything from how much Americans can borrow to how quickly they have to pay it back. Here’s what to know as we head into a new year……..Continue reading….
By: Cory Turner
Source: NPR
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Critics:
Student loan debt has proliferated since 2006, totaling $1.73 trillion by July 2021. In 2019, students who borrowed to complete a bachelor’s degree had about $30,000 of debt upon graduation. Almost half of all loans are for graduate school, typically in much higher amounts. Loan amounts vary widely based on race, social class, age, institution type, and degree sought. As of 2017, student debt constituted the largest non-mortgage liability for US households. Research indicates that increasing borrowing limits drives tuition increases.
Student loan defaults are disproportionately common in the for-profit college sector. Around 2010, about 10 percent of college students attended for-profit colleges, but almost 40 percent of all defaults on federal student loans were to for-profit attendees. The schools whose students have the highest amount of debt are University of Phoenix, Walden University, Nova Southeastern University, Capella University, and Strayer University.
Except for Nova Southeastern, they are all for-profit. In 2018, the National Center for Education Statistics reported that the 12-year student loan default rate for for-profit colleges was 52 percent. The default rate for borrowers who do not complete their degree is three times the rate for those who did. A Brookings Institution study from 2023 revealed that when the government pauses repayment on student loans, it most often “…benefit[s] affluent borrowers the most…” primarily due to affluent borrowers holding the largest student debt balances.
Student loans play a significant role in U.S. higher education. Nearly 20 million Americans attend college each year, of whom close to 12 million – or 60% – borrow annually to help cover costs. As of 2021, approximately 45 million Americans held student debt, with an average balance of approximately $30,000. In Europe, higher education receives more government funding, making student loans less common. In parts of Asia and Latin America government funding for post-secondary education is lower – usually limited to flagship universities, like the
National Autonomous University of Mexico – and government programs under which students can borrow money are uncommon. In the United States, college is funded by government grants, scholarships, loans. The primary grant program is Pell Grants. Student loans come in several varieties, but are basically either federal loans or private student loans. Federal loans are either subsidized (the government pays the interest) or unsubsidized. Federal student loans are subsidized for undergraduates only.
Subsidized loans generally defer payments and interest until some period (usually six months) after the student has left school. Some states have their own loan programs, as do some colleges. In almost all cases, these student loans have better conditions than private loans. Student loans may be used for college-related expenses, including tuition, room and board, books, computers, and transportation.
According to the Saint Louis Federal Reserve Bank, “existing racial wealth disparities and soaring higher education costs may replicate racial wealth disparities across generations by driving racial disparities in student loan debt load and repayment.” Low-income students often prefer grants and scholarships over loans because of their difficulty repaying them. In 2004, 88.5% of Pell Grant recipients who had bachelor’s degrees graduated with student loan debt.
After college, students struggle to break into a higher income bracket because of the loans they owe. Though, it’s been shown that when it comes to student loan forgiveness and advocacy around this issue, lower-socioeconomic groups are the ones most motivated to contact their legislators about student loans. In 1995, 64 percent of students whose family incomes falling below $35,000 were contacting their legislators concerning student loans.
The student makes no payments while enrolled at least half-time. If a student drops below half time or graduates, a six-month deferment begins. If the student returns to least half-time status, the loans are again deferred, but a second episode no longer qualifies and repayment must begin. All Perkins loans and some undergraduate Stafford loans are subsidized. Loan amounts are limited.
Many deferment and forbearance options are offered in the Federal Direct Student Loan program. Disabled borrowers have the possibility of discharge. Other discharge provisions are available for teachers in specific critical subjects or in a school that has more than 30% of its students on reduced-price lunch. They qualify for discharge of Stafford, Perkins, and Federal Family Education Loan Program loans up to $77,500.
Any person employed full-time by a 501(c)(3) non-profit group, or another qualifying public service organization, or serving in a full-time AmeriCorps or Peace Corps position,qualifies for discharge after 120 qualifying payments. ever, loan discharge is considered taxable income. Loans discharged that were not the result of long-term public service employment constitute taxable income.
Student loan borrowers may have their existing federal student loan debt removed if they can prove that their school misled them. The program is called Borrower Defense to Repayment or Borrower Defense. Subsidies are conditional depending on financial need. Pricing and loan limits are determined by Congress. Undergraduates typically receive lower interest rates, while graduate students typically can borrow more.
Disregarding risk has been criticized as contributing to inefficiency. Financial needs may vary from school to school. The government covers interest charges while the student is in college. For example, those who borrow $10,000 during college owe $10,000 upon graduation.
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