Why 2016 Will Be a Big Year For Student Loans

The nation’s student loan debt has expanded tremendously over the last decade. With more individuals attending college than ever, the demand for student loans has skyrocketed. For the class of 2015, the average amount of student loan debt is over $35,000 according to government data reviewed by Edvisors, a college planning website. As of March 2015, according to the Federal Reserve, the outstanding student loan debt in the U.S. stood at $1.27 trillion, and that number is expected to grow.

Recent graduates are saddled with student debt, preventing them from saving for retirement and delaying marriage and home ownership.

And the cost of college keeps going up and up each year. According to data from J.P. Morgan, (NYSE:JPM) college tuition is the fastest growing household expense and the cost of attending a public or private college will soar by 2033. Currently, according to JPM, it costs $42,419 to attend a private college and $16,943 to attend a private institution (costs include tuition, fees and room and board). By 2033, the price tag for a private college will swell to $102,086 and $45,589 for public universities. A newborn today, can expect to pay $440,000 for a private college by the time he or she attends, if the current trends continue, according to JPM.

Student loans have become the issue that defines Millennials, also known as Generation Y, the demographic consisting of those born between the early 1980s and early 2000s. In poll after poll, Millennials consistently rank student loans as their number one issue and one that the next president needs to address.

The big question on everyone’s mind is what does the future of the student loan crisis look like.

The 2016 presidential candidates all agree that student loans need to be addressed, but vary widely when coming up with a solution. And a recent survey from Student Loan Hero, a student loan education website, found that 26% of Americans with student loan debt believe that being able to refinance at lower rates should be the most important part of the next president’s student loan plan.

Democratic front runner Hillary Clinton has a $350 billion plan called the New College Compact to reduce the cost of college. Clinton’s main tenets include: that students shouldn’t have to take out loans to attend a public university, both federal and state governments will invest in higher education, make community college free and that those with loans can refinance at lower rates. Clinton has also proposed that colleges be held responsible when students default on loans.

Marco Rubio, the Republican Senator from Florida, frequently weaves student loans into his message while out on the campaign trail, as he recently paid off $150,000 in loans. The signature component of Rubio’s student loan plan is that federal loan borrowers will be automatically enrolled in a repayment plan based on income. Ten percent of a borrower’s earnings would go straight to student loans each month, taken directly from paychecks.

Bernie Sanders, the most liberal of all candidates and a Vermont Senator, has proposed eliminating tuition at four year public universities and colleges, with the federal government covering 67% of the cost and state governments picking up the remaining 33%.

Andy Josuweit, the CEO of Student Loan Hero, says that the free tuition conversation is picking up steam, but that the challenge is “coming up with a framework that everybody agrees to” when determining eligibility for free tuition.

But for those who are frustrated with the political system and lack of progress on the student loan issue, they’ve taken matters into their own hands and are attempting to change the student loan landscape.

Gradifi, a Boston based startup, partnered with PricewaterhouseCoopers to offer a student loan payment employee benefit plan, similar to a 401k plan. Gradifi already has a long list of companies eager to sign up for the program and attract quality talent. Unfortunately, corporations do not receive a tax benefit with this plan, as they do with 401ks. But a tax break could provide an incentive for more companies to set up student loan payment plans.

Read: Employers to Start Offering Student Loan Payment Plans

A somewhat controversial plan that is gaining steam among some economists is to limit who can borrow for education. Economists have warned for years that a higher education bubble is forming, and that if it bursts, it could have widespread damage to the economy, similar to subprime mortgage lending, leading up to the 2008 financial crisis. And data from the Department of Education shows that the student loan default rate has been rising steadily since 2005.

There are few restrictions on who can borrow for higher education, and little consideration given to determine if a borrower can repay or not. Economists promoting restrictions on student loan borrowers say that the goal is to ensure that those who take out loans can complete a college degree and repay their loans. They recommend using high-school grades, test scores, and potential earnings of majors among multiple factors to determine borrowing criteria.

Other economists suggest that more aid should come in the form of grants that do not have to be repaid, instead of loans.

However, opponents of this plan say that putting restrictions on borrowers would deny poorer individuals of an education and in turn a shot at the American Dream.

Increasingly student loan reform advocates are calling for more transparency at universities to publish detailed jobs data on their graduates, and encouraging prospective students to look at starting salaries after attending a particular school.

An analysis from Credible, a multi lender marketplace for student loans, concluded that while Ivy League universities might be the costliest to attend, the average starting salary after graduation is the highest compared to liberal arts colleges and public universities.

Stephen Dash, the CEO of Credible, predicts that high school students will increasingly look at the return on a college investment as a strategy to determine what kind of university to attend, instead of always opting to attend the less expensive institution.

And some have concluded that attending college simply isn’t worth the money anymore, and their dollars would be better put to specialized career training, or a pre-professional program.

The Flatiron School in New York City offers coding and web development courses for those with and without college degrees. The school, in conjunction with the NYC government, offers a free course of study specifically for those without a college degree and the results are promising. According to the school’s latest jobs report, this program places 97% of graduates in jobs with an average salary of $76,875. Other programs also boast high salaries and strong placement rates and cost $15,000, a fraction of the current cost of college. Adam Enbar, the school’s founder, doesn’t believe that Flatiron should discourage people from attending college, but rather specialized training programs provide another option to college.

“College is an amazing thing for a lot of people, but clearly if we’re open minded, we can build other systems that will work better for certain types of people” says Enbar.