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A Quick Explainer: What is the Government Doing to Fix the Student Debt Crisis?


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Student loans are now the second-biggest source of debt in the country, behind home mortgages. Source: Jessica Hill/Associated Press

Student loans are now the second-biggest source of debt in the country, behind home mortgages. According to the Federal Reserve Bank, more than half of all Floridians have outstanding student loan debt, and the average college graduate is in debt by more than $37,000.

Here is an in-depth look at what is happening to address what’s been called a student loan crisis at the state and federal levels.

How big is the student debt crisis?

  • Student loans are now the second-biggest source of debt in the country, behind home mortgages. According to the Federal Reserve Bank, more than half of all Floridians have outstanding student loan debt. Nationwide, the average college graduate is in debt by more than $37,000.

How does the situation here in Florida compare to the rest of the country?

  • Data from 2015 show the average Floridian graduated with a little over $23,000 of debt. That’s the fifth lowest average in the country. Scholarship programs like Florida Bright Futures have kept tuition for public universities here relatively low, but this debt is still a burden for many students.
  • In June, Governor Rick Scott’s decision to veto a bill that would have permanently extended an increase is Bright Futures funding intensified the uncertainty of many Florida students who rely on the scholarship to cover tuition costs.

What are some of the effects we’re seeing here of the student loan debt crisis?

  • One of the largest effects is on the housing market. This debt is making it harder for college graduates to purchase homes and start families. Graduates are also spending less and opening fewer businesses of their own. Economists say that all of these trends are bad for the national economy, which affects everyone.

What’s behind student loan debt increasing so much?

  • More students are going to college than ever before, especially students from low-income households, but experts argue that this alone is not enough to explain the increase is student debt.
  • College tuition also continues to increase. For example, the cost of tuition and fees at UCF has doubled since 2005. Universities raised tuition to cover increasing costs. At the same time that universities began spending more, many states cut funding for higher education.
  • The popularity of for-profit universities has also hurt students. Numerous reports have shown that some for-profit universities purposefully mislead students about their potential earnings and job placements, causing students to take out loans that they later realize they can’t repay. As of January, possible fraud victims wanted the government to forgive a total of 164 million dollars of debt, according to the Department of Education. Many of these people are students of ITT Tech, a for profit university that closed last year and is accused of deceiving students. Now that the universities they attended are under scrutiny, these students cannot find jobs with the degrees they earned.

What are Florida policymakers doing to address these increases?

  • The Florida Legislature passed a law that requires all colleges and universities to give students annual reports outlining the amount they have borrowed and the expected monthly payments for their debt. State Senator Dorothy Hukill, a Central Florida Republican, sponsored the law. She says students should receive more information when borrowing money, like adults get when they buy a new car or take out a loan.
  • The new law is a good start, but research shows that giving students financial information isn’t enough. They need personalized counseling throughout their college careers. The associate director of research and policy for the Florida College Access Network says that “information alone may raise awareness about their financial aid status, but students will need guidance and strategies for how to control costs and maximize other forms of aid that might be available. The new reporting requirements could be used as a means for colleges to connect students to these resources.”

How is the Department of Education addressing the student debt crisis?

  • Since President Trump has taken office, the Department of Education has not approved any applications for student loan forgiveness from possible fraud victims. There are 65,000 applications waiting for approval, many from former students of ITT Tech.
  • Although Education Secretary Betsy DeVos had plans to revamp the student loan servicing system by contracting one company to collect all federal student loans, she had since changes her mind. After facing much criticism, the Department of Education will now consider multiple companies for contracts. She hopes to have the federal student loan system overhauled by 2019.

Are there any signs the federal government has plans to help students deal with debt?

  • Senator Bill Nelson of Florida introduced a bill that would cap interest rates on student loans at 4 percent. The bill also would allow people with existing student loans to refinance them and get rid of origination fees. Nelson says the bill is a way to get Washington’s attention and bring the issue into focus.
  • Similar bills that have been proposed in the past failed to get bipartisan support, but Nelson said that he believes he can unite politicians around the issue.

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