In 2016, total U.S. student debt hit a record high for the 18th year in a row. Trump thinks his loan forgiveness program can help.

By Jared Keller

(Photo: Faustin Tuyambaze/Unsplash)

America’s student debt crisis is bad and getting worse. According to a new report by the Federal Reserve Bank of New York, total student debt in the United States rose to a record-breaking $1.31 trillion in 2016, the 18th year in a row that education debt rose to a new high.

(Chart: Federal Reserve Bank of New York)

Bloombergreports that outstanding higher education loans — that is, loans that have yet to be repaid — have doubled since 2009 alone, more than any other form of household debt, including credit cards. As of the end of 2016, 11.2 percent of student loans were more than three months delinquent. Student loans still only constitute a relatively paltry 10 percent of the $12.58 trillion Americans owe, compared to mortgages, which make up 71 percent. But there’s reason for pessimism here: Every other form of household debt (under which student loans fall) except auto has declined since 2008, including overall household debt, which dropped by 1 percent (a silver lining, Bloomberg notes, is that student debt only increased by 6.3 percent last year, the smallest annual jump since 2003).

(Chart: Federal Reserve Bank of New York)

But after a string of flawed initiatives including President Barack Obama’s costly student loan repayment program, might President Donald Trump be able to tackle the student debt crisis? Trump certainly seems to think so. In an October speech in Columbus, Ohio, the then-Republican nominee assailed rising student debt as an “anchor around [the] neck” of college graduates: “We would cap repayment for an affordable portion of the borrower’s income, 12.5 percent, we’d cap it. That gives you a lot to play with and a lot to do,” Trump told the crowd gathered in Columbus. “And if borrowers work hard and make their full payments for 15 years, we’ll let them get on with their lives. They just go ahead and they get on with their lives.”

As of the end of 2016, 11.2 percent of student loans were more than three months delinquent.

There are some questions about the efficacy of Trump’s proposed loan repayment plan, namely how it stands up against the Revised Pay as You Earn (REPAYE) income-based program currently used by the Department of Education. Trump’s proposal allows for borrowers to pay 12.5 percent of annual income to earn loan forgiveness after 15 years; REPAYE has borrowers pay 10 percent of their income over 20 to 25 years before qualifying for forgiveness. A CNBC analysis found that, under Trump’s plan, borrowers would pay down their student loan debt far faster than under REPAYE, even though they’ll end up paying more each month to do so. Under Trump’s loan repayment plan, you’re paying more to escape the crushing cycle of debt repayment faster than normally.

Trump’s plan is surprisingly popular among debtors: some 44 percent of respondents to a StudentLoanHero survey said they favored forgiveness after 15 years more than any other Trump administration education proposal. It’s worth noting, as the Washington Post did following Trump’s Ohio speech, that the president’s plan is actually quite liberal, a version of the generous repayment plans favored by Democrats in an effort to tempt young voters during election years. Trump’s plan “[flies] in the face of the fiscal conservatism that’s supposed to define the Republican Party,” as Danielle Douglas-Gabriel wrote in October:

Republicans have railed against the Obama administration’s expansion of income-driven repayment programs as fiscally irresponsible, yet the party’s nominee wants to lower the period of repayment, which is sure to cost the government quite a bit of money.

But the shorter repayment period may end up harming graduates who, in an economy still bearing the scars of the Great Recession, don’t immediately fall into a robust income stream. Even worse, the higher monthly repayment rate could be prohibitively expensive for some low-income college students: CNBC notes that those earning less than $40,000 annually would, under Trump’s plan, likely pay an average of $43 more each month — insignificant to affluent households, but a significant drain for those living on the margins or struggling to pay off auto or electric bills at the same time.

But inchanging the current parameters of loan forgiveness, Trump has also favored reforming the student loan business in the first place — reforms that may cause long-term problems. In a May interview with Inside Higher Ed, Trump campaign co-chair and policy director Sam Clovis floated the idea of getting the Department of Education out of the student loan market and allowing private banks to issue loans, a system the Obama administration abandoned in 2010 to favor the government’s Direct Loan program and Pell Grants from low-income students. Additionally, Trump would ostensibly give institutions of higher education more control over which students receive loans in the first place based on their prospective future earnings after graduation, the Los Angeles Timesreports, a program that would likely exacerbate existing socioeconomic and racial disparities in the student debt crisis. The latter event seems likely: The L.A. Times notes that private loan lender Sallie Mae had, as of January, seen shares jump by 70 percent since Election Day.

Privatizing the student loan process, like most other public services, is not an ideal option. The federal government washed its hand of student loans decades ago, a move that cost public higher education institutions around $500 billion since 1980, according to a review of data from the Bureau of Economic Analysis by Reveal. The pullback also gave Sallie Mae dominance of the loan market and reduced the Department of Education’s share of direct student loans to its lowest level ever in 2007. Since then, Reveal found, the private loan sector has become a major profit center for both Wall Street and Washington, permissive of predatory lending and aggressive debt collectors who rake in some $2 billion in government contracts alone.

So far, the only action Trump’s taken on education has involved nominating now-department chief Betsy DeVos. Time will tell exactly how his higher education plan pans out, but if the New York Fed report is any indication, he’d better act fast — America’s students can’t wait much longer for relief.