Understanding the generational divide on student loans

As the Biden administration once again extends the pause on student loan interest accrual and monthly payments, a mixed bag of groans, cheers and everything in between can be heard. But to the trained ear, if you listen carefully, a deeper response can be discerned — the rift of a generational divide. Millennial Americans (born 19811996), who make up the largest population group in the U.S., and Gen Z (1997-2012), have had to face the brunt of a failing student loan system that the baby boomers (1946-1964), and to a lesser extent, Gen X (1965-1980), were largely able to avoid.

With the staggering and unrelenting increase in higher education costs, the issues faced by recent and current student loan borrowers are no longer relatable to Americans (including most members of Congress) who have not had to attend college since the turn of the century. Working a summer job is no longer a viable way to pay for college nor has it been for years — not when the cost of college tuition is outpacing the rate of inflation by 171.5%. The cost of college tuition and fees at public four-year institutions has risen 179.2% over the last 20 years.

This staggering increase has created a divide between borrowers and so many of the older naysayers and critics of student loan reform. Let’s take Rep. Virginia Foxx, R-N.C., who has strongly come out against the pause in student loan repayments, and who commented on the extension by saying that taxpayers are “footing the student loan bill for graduate students and Ivy League lawyers.” Now, it is a common strawman argument that high income earners stand to gain the most from student loan reformation or forgiveness, and it is apparent Foxx believes this. However, contrary to this belief, studies show that 61% of students with incomes of $30,000 and under have debt, compared to the 30% of students with incomes over $200,000.

One need only look at when Foxx went to college to see why her understanding of the issue seems frail. Foxx attended and graduated from the University of North Carolina at Chapel Hill with a bachelor’s degree in 1968. In-state tuition at UNC from 1964-1968 was just $175 per year. Adjusted for inflation, that comes to around $1,579 in 2022. But the actual in-state tuition at UNC for 20222023 is $3,509.50 per semester (12 credit hours), or $7,019 per year. Further, in 1968, UNC charged mandatory fees ranging from $110 to $151. In 2022-2023, that fee now amounts to $1,008.56.

Without even delving into the difference in housing costs, books and materials, general cost of living and technical fees, the difference in cost is stark. In total, the four years at UNC for Rep. Foxx cost $1,229 or $10,107.60 adjusting for inflation. That same education today would cost approximately $32,110.24 in tuition and the comparable student fee alone. The modern student must pay over two-thirds more to obtain the identical degree as Foxx did in 1968, but going off her and many of her colleagues’ comments, it is easy to see many are too old or too wealthy to understand the issue facing borrowers.

Even for lawmakers who went to college between 1990 and the early 2000s, college costs have increased so dramatically that the landscape for recent graduates and current students is difficult to truly appreciate. This also goes for professional programs like law, dental and medical, which see their graduates incurring $150,000+ in student debt for degrees that used to cost a fraction of that price even just 15 years ago.

Despite this sixth extension of the pause on student loans via the CARES Act, a joint report issued last summer found that 63% of student loan borrowers who have made payments during the payment pause still owe more now than they originally borrowed, and that one-third of these borrowers owe more than 125% of their original loan balance, despite having no interest accruing. This is a scenario that older generations did not have to contend with, and it is the primary reason that many are unable to appreciate the scope of the problem.

While politicians pontificate on the issue or dangle student loan forgiveness as a carrot for voters this November, only one thing is certain: The 43.4 million borrowers of student loans, holders of $1.75 trillion in student debt, are caught in the middle of a political crossfire that is marred with misunderstanding, oversimplification and generational hardship.