Solutions to help alleviate America’s crippling student debt crisis have taken a prime position amongst the Democratic candidates vying for the White House in 2020.
As they should because the numbers around the student loan crisis are disturbing. Just don’t expect everyone — from Democratic presidential hopefuls to those in the financial services industry — to agree on one ultimate solution that fixes things overnight (if at all).
“I think the solution is education and transparency,” SoFi CEO Anthony Noto told Yahoo Finance. When asked if bailouts of indebted students or free college were the answer to the crisis crippling the lives of many graduates, he said “I don’t think that is the solution.”
SoFi is primarily an online lender, offering everything from home mortgages to student loan refinancing. Noto said the company has recently gone into giving college loans to those straight out of high school. But along with that loan, SoFi serves up education on what a person would make based on their college major of choice. That is then weighed up against the debt the prospective student may be looking to incur.
“One of the reasons we have entered the in-school student loan market is to help them make the right decision at the beginning,” Noto explained. “College tuition has gone up meaningfully. A college education has been deemed a necessary factor in getting a great job and great income and nobody really has done the math on how much debt you can afford based on a career you are likely to choose.”
Student debt levels are insane
Student loan debt hit its highest level ever in 2018. More than 44 million borrowers owe $1.5 trillion in student debt in the U.S., per data from the Federal Reserve. Student loan debt is the second largest consumer debt line item, trailing only mortgage debt.
Among the class of 2018, 69% of college students had student loans and graduated with an average debt of 29,800, according to LendingTree. About 11.5% of students are 90 days delinquent in their loans. The average monthly payment on student debt is a not so cheap $393.
With many graduates earning peanuts for years in their chosen professions, the debt load could be suffocating each month. And in turn, the inability to spend more freely reduces the output of the U.S. economy.
Several Democratic presidential hopefuls such as Bernie Sanders and Elizabeth Warren have proposed free public college tuition with assistance from the Federal government as one way to get the student loan crisis under control. One presidential hopeful Wayne Messam, mayor of Florida’s Miramar City who is a longshot candidate, even suggested forgiving student loans.
Meanwhile, other Democratic contenders like Kamala Harris and Cory Booker have backed a new plan to expand the Public Service Loan Forgiveness program. The program — which the Trump administration has sought to end — allows borrowers who work in government and some nonprofits to have select federal loans forgiven.
The new plan would have student debt forgiven in five years instead of the current scheme of waiting for 10 years to qualify.
Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi