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5 Ways The Right Can Start Fixing The Student Loan Crisis Without Punishing Taxpayers

We need to do something to bridge the gap back to the American dream for college grads.

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As another school year begins and the number of Americans defaulting on paying back money borrowed for college approaches 10 million, it’s clear that student loan debt has become a crisis that threatens the realization of the American dream. One side argues students need to “be smarter when they borrow,” and the other side says, “Let’s cancel the debt.” To be clear, if you borrow money, you should have to pay it back or face consequences; that said, the solution has to lie somewhere in between these extremes.

First, some background. It is a fact that college costs have risen at unjustifiable levels. The average cost of a college degree has increased about 42 percent faster than inflation. The big reasons for this appear to be, in no particular order: a general drop in state funding levels, administration bloat, easy credit, and “amenity wars.” One could make an argument for each of these as a leading factor, but easy access to credit stands out as significant.

According to the Department of Education, there is about $1.72 trillion in federal student loan debt outstanding, with 42.6 million borrowers. The average federal student loan balance is roughly $40,000, and the average total balance may be as high as $43,000 when private debt is included. In 2007, the average federal balance was about $18,000. On a 10-year term, the monthly payment on a new loan at the prevailing rate of 6.52% is nearly $500 a month.

The average starting salary for a graduate in 2026 is $49,500. According to TurboTax, the average blended tax rate at this income is 22 percent, making net pay slightly more than $3,200 a month. This means the average graduate is paying nearly 15 percent of his net pay to cover student loans. A “good” debt-to-income ratio is 36 percent. If you have a car payment, mortgages are pretty much off the table, and you are living paycheck to paycheck.

More than one million borrowers have loan balances higher than $200,000. Thirty-three percent of all physicians are in this category. In fact the top 7 percent of borrowers account for a third of all student loan debt. Post Covid, a fifth........

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