The Daily: Fixing Student Loans

April 22, 2022

The big idea: Student loans don't have to be like this

The Daily strives to reveal a new idea in every episode. Below, we go deeper into one from our show on President Biden's student loan dilemma.

Stefani Reynolds/Agence France-Presse — Getty Images

Growing up, Rachel Cunningham had two dreams: to become a mother and to have a career in musical theater.

So a few years ago she set off to pursue the latter. She successfully graduated from the Boston Conservatory at the Berklee College of Music and moved to New York City to apply her degree. But Rachel is an American, so her dream came at a price: over $200,000 in student loan debt.

It's a cost so obscene that it has threatened to extinguish her first dream entirely. The "unbelievable, horrible, crushing weight" of the debt has forced Rachel, 26, to ask whether being a parent is even possible for her, especially after her industry was rocked by the pandemic. "I want it. But I don't know if I can afford it," she said. Rachel now works at a restaurant in the West Village.

For millions of young Americans like Rachel, student loan debt is the organizing principle of their lives, replacing the dreams they once had with an exacting pragmatism. Now, they spend their adult lives grimly policing their paychecks, their payments and even the prospect of a pregnancy. As you heard on Monday, the Biden administration recognizes that the skyrocketing levels of student loan debt aren't sustainable — and is currently grappling with how to address the problem.

So far, that's looked like pushing the problem off for another day, by continuing to pause loan repayment during the pandemic. But what happens if the day comes for structural reform? (And will that day come at all?) Below, we share comparative examples of what paying for university education looks like around the world, as a reminder that the status quo isn't fixed — and that other realities are possible.

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Our expensive status quo

The average annual price tag for attending a private, four-year American college is now around $50,000. This cost has tripled at public colleges and universities in the past three decades, and, similarly, the nation's student loan debt has also tripled in the last 13 years, now totaling some $1.6 trillion.

J.P. Morgan predicts that four years at a private college could cost as much as $487,004 in 2035. About a third of all student loan debt will never be paid off, according to the Department of Education's projections — and some economists think that's an underestimate.

As a result, in recent years, "cancel student debt" has become a popular refrain; what was once a politically radical demand chanted by activists is now a proposal championed by the top Democrat in the Senate. And President Biden, who campaigned to make community college free and accessible, and endorsed the cancellation of $10,000 in federal student debt per borrower through legislation, is being pressed to respond.

The policy options in front of him are fraught with equity, economic injustice and sustainability concerns. Long-term, structural change would require a comprehensive overhaul of our current system, not just temporary relief for those saddled with loans. And while policy analysts generally agree on a need for reform, determining which path to take is a contested matter.

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A league of our own

People in other developed nations, or even in older American generations, rarely have had to contend with the burden of extensive student loan debt. In other wealthy countries, university education is treated as a public good — much as K-12 education is already treated in the United States.

The United States prides itself on being a destination for higher education seekers from around the world. But are the tuition costs associated with that learning something to be proud of? Below, we highlight three systems where university tuition and student loan financing is approached differently.

Australia: Australia has much lower tuition costs than in the United States, which can range up to the equivalent of $8,300 per year, depending on the course of study. This results in average borrowing around $23,500.

Australian borrowers do not start making payments until their income exceeds the equivalent of about $33,000. Payments are collected automatically through the tax system and adjust themselves automatically with income — similar to tax withholding in the United States. Students can also choose to pay for tuition up front, but 85 percent to 90 percent take out an income-contingent loan instead.

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Automatic collection of income-based payments is a critical ingredient of a well-functioning loan system, Rohit Chopra, a senior fellow at the Consumer Federation of America told The Upshot. "When borrowers have the choice to repay through their employer, this cuts out much of the red tape and the distorted incentives of middlemen."

Sweden: Swedish universities do not charge tuition, and universities are funded by grants from the government. However, many students take out loans to pay for living expenses during college, and average student debt levels in Sweden were the equivalent of around $21,000 in 2018. This is comparable to the average debt levels in the United States, but students in Sweden are far less likely to default on their loans, thanks to low interest rates and a much longer runway for repayment.

Sweden "offers a simpler and more manageable repayment process for students," said Kevin James, founder and chief executive of Better Future Forward, a nonprofit focused on education finance reform. "In contrast, U.S. federal student loans offer a mishmash of subsidies and repayment plans that provide wholly inadequate protections to students relative to the money spent."

Scotland: Tuition is free for Scottish students at universities in Scotland. The Student Awards Agency Scotland, a government entity, covers the full fees of eligible Scottish and E.U. nationals who apply; the payments are sent directly to the college or university.

To qualify, students must have chosen a course that is funded by the agency and meets certain residency criteria. The Scottish government also sets the tuition rate for these students. For the 2019-20 academic year, tuition is as high as 1,820 British pounds ($2,300), depending on the program.

Because university was essentially free for me, I had a lot more freedom to pursue my interests, including further education and academic work.

— Olga Loza. Undergraduate tuition: £7,280. Loans: $0.

The verdict: While no system is perfect, experts who spoke with The Upshot agreed that the best student loan repayment system is one that is simple, that is based on students' incomes, that spreads loan payments over longer periods and that's able to collect payments automatically through the tax system.

Such a system is a far cry from what's in place in the United States. While structural reforms are on the Biden administration's radar, looking beyond our borders for inspiration could help us replicate success instead of reinventing the wheel.

LEARN MORE ABOUT THE DEBATE AROUND STUDENT LOAN FINANCING:

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By 'The Argument'

Do you recognize this choir?

This week on "Still Processing," co-host Wesley Morris spoke to his friend Hanif Abdurraqib, a poet and music critic, about TV theme songs — and the now ubiquitous "skip intro" button.

Wesley and Hanif run through some of their all-time favorite theme songs, from "Three's Company" and "The Jeffersons" to "Orange is the New Black" and "White Lotus." They discuss how TV themes not only help you settle into the world of a show, but, over time, can become "an elemental part" of who you are. Every time we hit "skip intro," we're denying "the possibility of having this connection with a show that becomes bigger and more meaningful than the show itself," Wesley says.

At the end of the episode, Hans Buetow, a producer on the podcast, shows Wesley and Hanif a video of a choir singing the "Good Times" theme song. It's a rendition so powerful that it moves Wesley and Hanif to tears (you can watch it here). While they have confirmed that the singers are backstage at the Saban Theater in Beverly Hills, Calif., they haven't been able to identify just who they are.

So, we'd love to know: Do you have any information or ideas about who this choir might be? If so, please email the team at stillprocessing@nytimes.com.

LISTEN TO THE FULL EPISODE.