Americans collectively owe more than $1.74 trillion in student loan debt – a number that is growing as tuition costs continue to rise. Not only that, but a recent Bankrate survey discovered that 70% of millennial and Gen Z borrowers have put off major milestones, like saving cash for retirement, paying off high-interest debt and purchase a home, because of their student loans.
The current state of student loans may be the consequence of many years of policy and legislation. Here's a complete timeline of what led to the development of student education loans, in addition to how they've evolved over the years and what you can expect from them in the future.
Student Loans: A Complete Timeline
The procedure for obtaining a student loan is different within the decades, as have some of the associated risks and rewards. Here's what you need to know.
1944: GI Bill
In summer time of 1944, President Franklin D. Roosevelt signed the Military Readjustment Act in order to help veterans of World War II reintegrate into society. This law, known as the GI Bill, made it easier for veterans and military personnel to go to college or vocational school by dramatically reducing their tuition fees, amongst other things. To date, service members are able to receive financial help with the GI Bill.
1958: National Defense Education Act
World War II sparked fierce competition between your United States and Russia, especially when the second launched the world's first space satellite, Sputnik, in 1957. Naturally, this raised concerns among Americans about the delay technological.
In an attempt to create higher education less expensive and strengthen the machine to satisfy the nation's technological and defense needs, President Eisenhower signed the National Defense Education Act in 1958. Among its provisions, this law offered grants, scholarships and student loans to those who majored. in engineering, mathematics, education, science and foreign languages.
1965: Law on higher education
During his presidency, Lyndon Johnson urged Congress to enact legislation making post-secondary education more accessible to low- and middle-income families, stressing that education was \”no longer a luxury, but a necessity\”.
Congress listened, and in November 1965 the Higher Education Act became official. This act dramatically increased federal funds for universites and colleges and created numerous grants for college students with \”considerable\” financial need.
The Higher Education Act also delivered the Guaranteed Student Loan Program, also known as the Federal Family Education Loan Program or FFELP.
1972: The Basic Educational Opportunity Grant
Established in 1972, the Basic Educational Opportunity Grant is built to reduce the cost of higher education for low-income students pursuing their first undergraduate degree. Today, that grant is called the Pell Grant, being renamed in 1980 after Democratic U.S. Senator Clairborne Pell of Rhode Island, who had been the driving force behind its approval.
The Pell Scholarship is considered a foundational part of student financial aid, having a maximum award of $6,895 for the 2022-23 academic year.
1992: Alterations in higher education
A revision of the Higher Education Act in 1992 resulted in a significant expansion of the federal education loan program. Until now, all federal loans were subsidized, meaning the federal government absorbed interest while students were in class.
With the larger Education Amendments of 1992, the federal government began offering unsubsidized loans to all students – no matter financial need – as long as they were enrolled a minimum of half-time in an institution. qualified.
These changes also come up with Free Application for Federal Student Aid, or FAFSA, and an income-contingent repayment pilot program.
2001: Economic Growth and Fiscal Reconciliation Act
During his presidential campaign in 2000, President George W. Bush promised a series of tax cuts to stimulate the united states economy and end the current recession. This materialized in June 2001 as he signed the Economic Growth and Fiscal Reconciliation Act.
Among other things, this law eliminated the time during which borrowers could deduct student loan interest from their taxes. The limit around the interest that may be deducted seemed to be raised to $2,500, where still it stands today.
2005: Higher education reconciliation law
During his second term, President George W. Bush signed another law to help student borrowers. With the Higher Education Reconciliation Act, graduated pupils became eligible for PLUS loans. These loans have higher interest rates than other federal loans for higher education, however they allow students to borrow as much as the entire price of attendance.
2007: Cost Reduction and College Access Act
Also signed by President George W. Bush, the College Access and Cost Reduction Act of 2007 achieved several milestones.
The act pledged to cut interest rates on the five-year period and increased funding for the Pell Grant program by $11.4 billion. Also, the income-based repayment program and also the Public Service Loan Forgiveness Program (PSLF) are intended to make education loan repayment more manageable.
2010: the FFELP is eliminated
In 2010, President barack obama signed the Care and Education Reconciliation Act, which eliminated the federal Family Education Loans program by requiring all federal student education loans to become direct loans, offered through the federal direct loans program William D. Ford from the government.
2022: Pay while you earn
The Department of Education made changes in 2022 to the Pay While you Earn repayment schedule to include all borrowers, not only those who got loans on or after October 1, 2007.
These changes resulted in the development of the revised Pay As You Earn repayment schedule, which caps your monthly payments at 10% of the Discretionary Income.
2022 -present: COVID-19 and student loan forbearance
In 2022, the world was hit by the COVID-19 pandemic, which led to mass layoffs along with a recession. In reaction, President Trump signed the CARES Act on March 27, 2022. Among other provisions, this law provided temporary relief to borrowers by placing all federal student loans on administrative forbearance, without interest.
Although payments would resume exactly the same year, borrowers were granted six more extensions, the final approved by President Joe Biden in April and hang to run out on August 31, 2022.
The Biden administration has additionally made substantial changes over the past year to federal programs to bring more borrowers nearer to forgiveness. These include expanding borrower defense, waiving taxes on any canceled balances through 2025, automatically waiving interest on federal student education loans for service members, and automatically canceling debt for disabled borrowers.
The US student debt crisis in numbers
The chart below shows the way the nation's education loan balance is continuing to grow in the last decade, from $1.05 trillion this year to nearly $1.75 trillion today.
The way forward for student loans
During his presidential campaign, Biden promised to forgive as much as $10,000 in federal student loans for each borrower. Senator Customer advocates, Senate Majority Leader Chuck Schumer and Congresswoman Ayanna Pressley also have advocated for education loan forgiveness recently, insisting that Biden can and must forgive at least $50,000 indebted. federal student per borrower. Additionally, the administration has been working to update some of its repayment plans based on income to fix system errors and perhaps introduce new plans.
But these proposals, yet others, are still pending.
\”If the administration attempts to waive loan obligations, you will see a legal challenge to the authority of the administration to do this and there seems to be broad opposition in Congress to such activity,\” Scott MacDonald said. , founder of the MacDonald Community Scholarship Program and author of \”Debt-Free Education: Giving Back and Paying It Forward.\”
Stuart Siegel, educational funding specialist and founding father of FAFSAssist, will follow MacDonald. \”The fact is, before the Biden administration makes its position public, anything can be done,\” he says. \”But I believe there will be legal challenges that may delay startup repayment.\”
In the meantime, Siegel encourages borrowers to explore these choices to make their debts more manageable:
- Apply for an income-based repayment plan. For those who have federal student education loans and can't afford your standard student loan payment, applying for an income-based repayment schedule can significantly reduce the amount you have to pay every month.
- See if you qualify for forgiveness. With the changes happening using the PSLF program, you may be entitled to Federal Education loan Forgiveness, or at best compare to it should you worked at a nonprofit, government agency, or another eligible employer.
- Consider refinance your private loans. Private student loans don't provide the same protections as federal student loans, also it may well be a good idea to refinance them before rates of interest increase, particularly if you actually have a variable rate.
The bottom line
Student loans came a long way since their inception in the 1950s. Although some changes are now being designed to make the system more effective, there's still lots of work to be achieved. For now, a good thing you can do is explore your options to choose the one that best suits your funds and needs.
