A Fork in the Road

As of early 2025, student loan debt in the United States has ballooned to a staggering $1.77 trillion. That figure isn’t just a cold number on a balance sheet, it’s a defining weight on the backs of 42.7 million Americans with federal student loans, averaging about $38,375 per borrower. When private loans are factored in, that number jumps to roughly $41,618.

This is not merely a personal finance issue for graduates, it’s an economic issue for the entire country.

The pandemic-era pause on student loan payments gave millions of borrowers a brief but impactful financial reprieve. With payments now resumed, the pressure has returned, and so have the ripple effects. Many borrowers, still recovering from inflation, stagnant wages, and housing costs, are being forced to redirect spending from essentials and local economies toward servicing debt.

When 42.7 million Americans are compelled to funnel money into federal loan payments, that’s money not being spent on rent, groceries, childcare, or small businesses. Resuming payments at current levels has a depressive effect on economic growth, consumer spending, and even mental health. The 4.86% federal loan default rate in Q4 of 2024, and 1.61% for private loans in Q1, hint at the growing financial strain.

Critics often frame student loan forgiveness as a handout. But economic data tells a more nuanced story. Wiping out, or at least significantly reducing, the burden through forgiveness, zero-interest repayment plans, or discounted lump-sum payments could serve as a powerful economic stimulus.

Consider what happens when tens of millions of Americans are suddenly freer to invest in homes, start businesses, or simply keep up with the cost of living. That’s economic velocity. That’s growth.

Moreover, the argument for interest-free repayment isn’t just moral, it’s rational. Unlike mortgages or car loans, student loans don’t finance a tangible asset, they finance potential. And interest on that potential too often traps borrowers in cycles of repayment that outlive the value of their degrees.

Forgiveness or interest elimination wouldn’t be without cost. But the cost of inaction, reduced homeownership, delayed family formation, suppressed entrepreneurial activity, and growing economic inequality, might be greater in the long run.

We are now at a pivotal moment. Policymakers must choose between enforcing a broken system that extracts from those least able to pay or reimagining a new model that sees education not as a consumer product, but a public good.

Resuming payments may balance short-term ledgers, but reform or forgiveness could recalibrate the economy for long-term prosperity. The math may be complicated, but the choice is becoming increasingly clear.

The student debt crisis isn’t just a number, it’s a question of what kind of economy, and society, we want to build.

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