Closing Thoughts

The Unintended Consequences Of Student Debt

New perspectives on a growing national crisis

by Scott Winstead

Mr. Winstead is the founder of, where he covers online learning and higher education. Visit

It’s no secret that student debt is a huge problem in the United States. It’s estimated that there is nearly $1.75 trillion in outstanding student loan debt among 44 million borrowers. And the average borrower owes $28.950.

It’s no wonder President Biden’s recent announcement to cancel up to $20,000 in student debt for qualified borrowers was met with quite a bit of fanfare, especially in the face of rising inflation and stagnant wages.

But will President Biden’s plan do anything to solve the student debt crisis? Will it actually help current borrowers? And will it do anything to curb the rising costs of college? Let’s unpack these concerns below.

The Unintended Consequences of Student Loans

For many people, acquiring student loans is the only way to attend college. In fact, only about 40% of Bachelor’s degree-holders graduated without any student debt. That vast majority end up with at least some debt.

And while studies show that failing to go to college can decrease lifetime income, holding student debt after college can also have a negative impact on people’s financial lives.

For example, one study shows that people who achieve their bachelor’s degrees by incurring student loans have significantly less in their retirement accounts by age 30 than degree holders who did not pay with student loans. Another report shows that 85% of student loan borrowers have delayed purchasing a home due to their inability to save while paying back their debt.

In light of the above facts, President Biden has recently announced student debt relief.

Will President Biden’s Loan Forgiveness Fix the Problem?

There’s no arguing the fact that President Biden’s student debt forgiveness plan will offer some relief to current borrowers. The relief comes in the form of up to $20,000 in debt cancellation for Pell Grant recipients, and up to $10,000 in debt cancellation for non-recipients. Borrowers just have to meet the income requirements, which means individual income levels less than $125,000 or $250,000 for married couples.

But what about future student loans? Biden’s plan only applies to loans taken out prior to July 1, 2022. However, each year between 30 to 40 percent of undergraduate students take out student loans. And while enrollment is on the decline, there are still about 16 million undergraduate students enrolled each year. That means there are still about 5 million students taking out new loans each year – none of which will apply for forgiveness under the president’s plan.

The new plan also assists future borrowers (along with current borrowers) with their monthly payments, as it caps payments at 5% of the borrowers discretionary income, which could free up room in many borrowers budgets.

However, the fact is that student debt relief is primarily for past borrowers. Meanwhile, the cost of college is still rising at unprecedented rates. In fact, in the last 50 years, the cost of going to college has risen at nearly 5X the rate of inflation. With that said, new students can expect their tabs (and debt) to continue rising accordingly. Until something is done to curb the rising costs of attending college, nothing will change, and we’ll be staring in the face of the same problem year after year.

Tips to Avoid Student Debt

If we can expect the cost of college to continue rising and can’t depend on President Biden’s student debt relief to assist future borrowers, what can be done to avoid being saddled with a ton of debt upon graduation?

Here are a few tips to help you avoid taking on too much debt when you’re pursuing your degree:

1. Start at a community college. Community college tuition is often a fraction of the cost of tuition at a four-year university. For some perspective, average tuition to attend community college is $3,500 annually. But attending a four-year university can cost you $20,000+ easily.

One study shows that people who achieve their bachelor's degrees by incurring student loans have significantly less in their retirement accounts by age 30 than degree holders who did not pay with student loans...

These days, many community colleges offer programs that allow students to transfer their credits to a four-year institution once they’ve completed their associate’s degree. So, you can get a quality education while cutting out nearly half the debt. It’s a no-brainer!

2. Consider working part-time while you’re in school. Taking on a part-time job can help you offset the cost of tuition and other expenses associated with pursuing your degree. And, if you’re able to get a job in your field of study, you may even be able to get some valuable experience that will help you once you graduate. One great part time job opportunity for students is tutoring. Whether in-person or online, tutors are in high demand and get paid handsomely.

3. Look into scholarships and grants. There are a lot of scholarships and grants out there that can help you cover the cost of tuition and other related expenses. So, be sure to do your research and see what’s available to you. You may be surprised at how much free money is out there for students who are willing to put in the effort to find it. I recommend starting here to look for opportunities.

4. Consider trade school. Trade school can be a great option for students who want to avoid taking on a ton of debt. And, in many cases, you can complete your training in a shorter amount of time than it would take to earn a traditional four-year degree. As far as future income is concerned,  trade school graduates often make just as much (if not more) than their four-year degree counterparts. And job outlook for many trades is great right now. In fact, we’re experiencing a labor shortage across many industries, so high-paying opportunities abound.

5. Online certificates. With the rise of online education, there are now more options than ever before when it comes to pursuing a degree or certificate. In many cases, you can complete an online program in a fraction of the time (and cost) of a traditional brick-and-mortar program. Some people are forgoing degrees altogether, and opting for programs that offer certificates such as Google’s Career Certificates which offer flexible online programs that will qualify you for specific jobs.

6. Have a plan (and stick to it). One of the best ways to avoid taking on too much debt is to have a plan before you even start school. Map out what you need to do to complete your degree in the shortest amount of time possible, and make sure you understand the associated costs. Then, do your best to stick to your plan.

Of course, things happen and plans change, but beginning college with no plan at all can be an expensive way of trying to figure things out. Remember, if you can graduate in three years instead of four (or five), you’ll save a ton of money in the long run.

The Bottom Line

Paying for college can be a challenge. While future borrowers can’t rely on student debt relief, obtaining a degree doesn’t have to leave you saddled with mountains of debt. If you’re smart about how you finance your education, you can minimize your borrowing and avoid putting your future financial wellbeing at risk.

So, consider starting at a community college, working while you’re in school, and looking into scholarships and grants as ways to keep your student loan debt manageable. Make sure you have a plan prior to entering school and do your best to stick to it. And depending on what your plans are, maybe traditional college isn’t even the right move for you. After all, times really are changing!


One response to “The Unintended Consequences Of Student Debt”

  1. Chris Kite says:

    Very good article! Should colleges and universities who have exploited student loans be taxed or be subject to other means to help?