In terms of American exceptionalism, student loan debt stands out. No other country imposes the kind of costs on college and university students that the U.S. does, and nowhere else do loans cover so much of those costs. Experts think that the roughly $1.5 trillion in outstanding education debt in the U.S. is more than that of the rest of the world combined. Undergrads at U.S. public and nonprofit colleges who borrowed and left school in 2016 had an average debt of $28,650. It’s a situation that educators, consumer advocates and members of both political parties all decry. Agreement on solutions is harder to find. In the meantime, young adults are delaying setting up their own households in the face of a mountain of debt. Recent studies also show a growing economic divergence between young Americans with and without student loans. There’s widespread agreement as to who is worst off: college dropouts. They’re stuck with debt but without the higher earnings a degree might have brought to help pay it off.
President Donald Trump, a Republican, and the Democrats hoping to be his opponent in the 2020 election have laid out programs for reducing student debt. Trump in March proposed capping the amount of federal loans graduate students can take on, while Democratic candidates have instead focused on reducing the cost of college by raising wealth taxes and increasing government subsidies to higher education institutions with the proceeds. Senators Bernie Sanders, Elizabeth Warren and Kamala Harris have all pledged to eliminate tuition and academic fees for public colleges. Sanders and Warren have also called for using tax increases aimed at the affluent to cancel most existing student debt. Under President Barack Obama, the Education Department sharply expanded programs in which struggling ex-students make payments calculated as a percentage of income and at the end of 2018, about 8 million borrowers benefited from income-based repayment plans. Some schools such as Purdue University in Indiana have also offered income-share agreements, where students pay a percentage of their income for a fixed period of time in lieu of a loan.