By Mari Hansen The physical reality of higher education finance is immediately apparent in the construction of any mid-sized American university campus in October, when the air is crisp and the financial aid offices are silently processing the next round of loan paperwork. new structures. enlarged facilities. Climbing walls in recreation centers are more expensive to construct than entire academic departments were a generation ago. Every year, tuition rises more quickly than wages, inflation, and nearly every other consumer expense in the US economy. All of it is funded by the students who sign the loan documents on the other side of those walls. For the past few years, their nation has been debating whether or not some of them should be partially released from the bill, rather than why the bill grew to such a large size in the first place.
Over $1.6 trillion in federal student loan debt was owed by 43 million Americans as of September 2023. When private loans are included, the total exceeds $1.7 trillion, which is more than all of the nation’s credit card and auto loan debt put together. Home mortgage debt, which is over $12 trillion and has its own set of affordability issues, is the only consumer debt category that is larger. In other words, student debt is a serious policy issue.
Key information — U.S. student loan debt & forgiveness debate
| Total student debt (2023) | $1.7 trillion total outstanding student loan debt in the U.S. — 43 million federal borrowers collectively owe over $1.6 trillion; private loans push the total higher |
| Debt vs. other borrowing | Student debt now exceeds all auto loan and credit card debt combined — only home mortgage debt, at over $12 trillion, is larger in the U.S. consumer borrowing landscape |
| Debt growth rate | Average balance per borrower rose 39% from 2008 to 2022 — college tuition has grown many times faster than household income over the past three decades |
| Who owes the most | More than one-third of all student debt is held by the 7% of borrowers who owe over $100,000 — yet borrowers with smaller balances often struggle most, particularly those who left without completing a degree |
| Default risk disparity | Students who do not complete their degrees default at three times the rate of graduates — Black, Latinx, and American Indian students are all more likely to default than white students |
| Biden forgiveness efforts | The Biden administration’s broadest student debt cancellation plan was struck down by the U.S. Supreme Court — several narrower relief programs totaling $11.5 billion were implemented before legal challenges halted wider action |
| Racial wealth dimension | Black college students generally carry more debt than white students and face greater repayment difficulty, in part due to lower average levels of intergenerational family wealth — a disparity economists link to decades of systemic barriers |
| International comparison | The cost of college — and resulting debt — is higher in the U.S. than in almost all other wealthy countries, where higher education is often free or heavily subsidized through public funding |
| State funding withdrawal | U.S. states significantly cut funding for public universities and colleges following the 2008 financial crisis — cost was progressively shifted onto students through rising tuition rather than restored through public investment |
| Core structural problem | Georgetown Law research argues the student loan crisis stems not from debt scale alone, but from a federal education finance system that failed to address the underlying cost structure driving borrowing in the first place |
It is a fundamental aspect of American household finance, subtly influencing choices about where to live, whether to launch a business, when to purchase a home, and whether or not to withstand future financial shocks. Even though the forgiveness debate is politically charged and genuinely important, it keeps focusing on the issue of who should receive relief while the machinery causing the problem continues to operate as usual.
The Biden administration’s most comprehensive forgiveness plan, which would have eliminated up to $10,000 in federal student debt per borrower and $20,000 for Pell Grant recipients, was overturned by the Supreme Court. A dispute over the proper application of an existing statute that was never intended for mass debt cancellation constituted the entirety of the legal challenge, which was partially about executive authority and partially about politics.
The litigation failed to address the reasons why the average balance per borrower increased by 39% between 2008 and 2022, why the cost of higher education in the United States is higher than in nearly every other wealthy nation on the planet, where degrees are often either free or heavily subsidized, or why college tuition has increased many times faster than household income over the past three decades. These are structural questions. The argument over forgiveness is transactional.
The argument for forgiveness is complicated by the location of the debt itself in ways that are not sufficiently discussed. The 7% of borrowers who owe more than $100,000 account for more than one-third of all student loan debt; these borrowers are usually graduate and professional degree holders, many of whom go on to have higher-paying jobs in finance, law, or medicine. In the meantime, the borrowers with the biggest balances are frequently not the ones who struggle the most.
Students who enrolled, accrued debt, and dropped out before earning a degree default at a rate three times higher than that of graduates, bearing the financial burden of borrowing without the expected increase in earnings that comes with a degree. One of the reasons the fairness debate is so ongoing and circular is that a blanket forgiveness policy calibrated by dollar amount redistributes money in ways that don’t necessarily correspond with need or hardship.
All of this has a racial component that should be acknowledged more explicitly than is usually the case in mainstream economic reporting. Black college students typically take on more debt than white students, and they are more likely to struggle with repayment after graduation. This is not primarily due to decisions made at the financial aid office, but rather to lower average family wealth accumulated over generations, which is the result of practices and policies that prevented Black Americans from engaging in wealth-building markets that white Americans could access. A portion of that discrepancy might be resolved by debt cancellation. It was unable to deal with the mechanism that generated it.
What happened to state funding for public universities after 2008 is the more significant, and generally unanswered, question. The answer is straightforward: instead of reinstating the investment when budgets recovered, states significantly reduced it and transferred the cost to students through tuition increases. In order to meet the demand, federal lending programs grew.
This led to a situation that Georgetown Law researchers have characterized as a finance system failing because the underlying cost structure was never addressed, rather than the amount of borrowing. The price will continue to rise if you make low-cost credit available to cover it. Although there is disagreement among economists regarding the connection between the availability of federal loans and tuition inflation, it is a serious theory supported by substantial data that hardly comes up in political discourse.
Watching the forgiveness argument unfold in courtrooms, congressional hearings, and campaign speeches makes it difficult to ignore the fact that the entire framing treats the current cost of higher education as a fixed given rather than a variable that policy could affect. The tuition structure remains unchanged whether $10,000, $50,000, or all of the debt is forgiven. The following class of students enters through the same door and signs the same documents. Repairing existing debt without altering the causes of it is a gesture that is meaningful to the people it helps and truly meaningful, but it is not a solution to the issue that results in the same numbers in the following generation.