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4 Myths About Student Loan Debt and Tips to Debunk Them

College administrators and student debt relief advocates explain misconceptions about student loans and financial aid.

Photo credit: digitalista/Bigstock

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Getting a college degree is still one of the most reliable ways to increase economic mobility, especially for people from low-income households, but that can easily be offset by the amount of debt many students take on for higher education.

With student loan repayment set to resume in October after a more than three-year pause caused by the COVID-19 pandemic, and after the Supreme Court ruled against President Joe Biden’s loan forgiveness plan, the effects of student debt continue to be a heated topic.

Nearly 44 billion people owe a total of roughly $1.64 trillion in student debt, according to the most recent data from the U.S. Department of Education. But, experts, advocates and university administrators said during a panel at  the Education Writers Association’s 2023 National Seminar that there’s more to the data than just surface-level numbers.

Speakers included Shamell Bell, visionary escalator at Debt Collective; Tanya Garcia, senior adviser to the president at The Institute for College Access & Success; and John Leach, associate vice provost for enrollment and university financial aid at Emory University. The Wall Street Journal’s Jennifer Forsyth moderated the panel. 

The panelists laid out a number of myths about college debt, and the students who take it on, that need debunking. The framework for the panel’s discussion was The Wall Street Journal’s Guide to Student Loans: Navigating the Myths and Misunderstandings About College Debt

1. Student Loan Borrowing 

Myth: Student borrowing continues to climb every year

Reality: Technically, student borrowing when adjusted for inflation has been declining. But, there’s more to it than that.

According to data from The College Board, total annual federal loans to undergraduate students have actually declined by nearly 50% between 2011-12 and 2021-22, after adjusting for inflation.  

But, there’s more to it than just the numbers.

Garcia said there are multiple factors people should think about in regard to that decline in student borrowing. One big one is the “nose dive” in postsecondary enrollment across the nation that started over a decade ago.

According to data from the National Center for Education Statistics, overall undergraduate college enrollment across the U.S. has fallen roughly 15% since 2010.

“So these lower borrowing trends are connected to how many students are choosing to enroll in postsecondary education,” she said. “There’s fewer students.”

Leach also suggested journalists look deeper than that declining federal student loan figure. 

“Just because the numbers have been in this long decline does not mean that there is not a real crisis,” Leach said. 

It’s important to think about who exactly are the students taking on this debt, he said. 

“The folks who are saddled with loan debt are, in our society, those with the fewest resources to be able to meet that debt, to manage that debt,” he said. “This represents a very real and dramatic drag both on the individual finances of our families, but also on the economy.”

Although the inflation-adjusted amount of federal loans for undergraduate students has fallen, that’s not the case for graduate student loans. Garcia pointed out that the amount students have borrowed through federal grad PLUS  loans has increased over the past decade. 

According to College Board data, Grad PLUS loan borrowing has increased by nearly 40% from 2011-12 to 2021-22.

2. Student Debt Cancellation 

Myth: Student debt cancellation will only benefit rich people

Reality: Student debt primarily impacts people who are not rich

The Debt Collective, a membership-based debtors’ union, is fighting for full student loan debt cancellation. Bell said she hears a lot of misconceptions in her work – namely that people don’t want to be paying for rich students to go to school for free.

“Rich people don’t have student debt,” Bell said. “Most of the people who applied for Biden’s student debt cancellation program live in ZIP codes where the median income is less than $35,000.”

Garcia said there’s a big misconception that low-income students tend to go to college for free because of financial aid, such as  the federal Pell Grant, but that’s not always the case.

“The current Pell Grant … It covers a third of the cost of attendance, and what that has meant in real terms is that almost half of all college grant recipients are taking out student loans because it’s just not enough,” Garcia said.  

According to a study from The Institute for College Access & Success, low-income student borrowers who received federal Pell Grants — most with family incomes under $40,000 — were more than twice as likely to have difficulty making loan payments than people who did not receive Pell Grants (31% vs. 14%).

Graduate degrees can leave low-income students with even more debt.

Bell is a first-generation high school graduate from South Los Angeles. She is now a full-time lecturer at Harvard University. 

“I did everything right. I got straight As. I got scholarships. I went to community college. I did all of the things,” she said. 

But, she still ended up with $250,000 in student debt.

3. College Student Demographics

Myth: Most students are young, living on campus and having school paid for by their parents

Reality: College students are a widely diverse population 

When people think of a typical college student, they probably think of someone who just graduated high school and is moving into their dorm with the help of their parents, but that’s far from the case for every student. 

According to Garcia, 25% of college students are older than 25. At community colleges across the U.S., the average student age ranges from 26 to 29.

“These are not people who are unencumbered by other responsibilities,” Garcia said. 

Garcia said nearly half of today’s students are “financially independent,” meaning they are not receiving financial help from their families for college.

People may also think that most college students are attending elite or flagship universities, but the majority of undergraduate students in America attend regional universities, minority-serving institutions and rural-serving institutions, Garcia said.

4. Financial Aid 

Myth: Wealthy schools give out great financial aid packages to students with need

Reality: Some do, but some don’t

Leach with Emory University said his institution has replaced need-based loans entirely with grants.

“If a student has financial need, we meet all of that need with grants and scholarships and federal work study,” Leach said. “Need-based loans are no longer a piece of the picture.”

Many people assume private, four-year institutions like Emory are much more expensive than public universities, and on paper, it does look that way, Leach said. 

Full cost of attendance at Emory this upcoming school year is $83,000, he said, but that’s not a figure most students need to worry about.

“Who pays that? $350,000, $400,000 and up incomes,” Leach said. 

Leach said although the “sticker price” of institutions has been rising over the years, for many schools, like Emory, the net price — tuition and fees minus institutional grants — has gone down.

“Emory University is slightly less expensive in terms of inflation adjusted net price than it was in 2005,” Leach said. 

Jennifer Forsyth, deputy chief of investigations at The Wall Street Journal, said that’s not the case for every elite or wealthy university. 

“Wealthy colleges don’t always do the right thing by low-income or needy families,” Forsyth said. “Some of them have billion-dollar endowments and actually still charge the low-income families a lot, and therefore, the families have to take out a lot of debt to go there.”

Forsyth said The Wall Street Journal’s Guide to Student Loans is a great resource to navigate that “sticker price” versus the net price that families and students actually pay.

Additional Resources

Here are some other suggested resources from panelists: