For Morehouse College graduate Keith Anderson, the surprise announcement by billionaire tech investor Robert F. Smith to pay off his entire class' student loan debts was nothing short of extraordinary.
While scholarships helped Anderson, a physics major at the all-male historically black college in Atlanta, afford most of his schooling, he still has close to $15,000 in loans. But Smith's pledge during Sunday's commencement ceremony means Anderson can attend graduate school with a clean slate.
"Before graduating, my classmates had been talking about how they will have to carry the debt for the rest of their lives," said Anderson, 21, of Richmond, Virginia. A fellow classmate even drew up a spreadsheet and calculated it would take him 25 years to pay back his $200,000 in student loans.
"I'm happy for my entire class," Anderson said Monday. "This is a weight off of everyone's back."
Smith's promise to eliminate up to $40 million in student loans for Morehouse's nearly 400 graduates is inspiring, student advocacy and consumer groups say, but the act of generosity also highlights the growing burden on student borrowers who owe close to $1.5 trillion in student loan debt nationwide.
That's double the amount from 10 years earlier, according to the Federal Reserve.
"There are millions of students who are still riddled with crippling levels of student loan debt," said Dan Zibel, the vice president and chief counsel of the National Student Legal Defense Network, a nonprofit focusing on students' rights to higher education.
The Morning Rundown
Get a head start on the morning's top stories.
"These are enormous sums of money that people are borrowing, typically early in their adult working lives," he added, "and the prospect of being riddled with gobs and gobs of debt — tens of thousands of dollars — for so long is a huge problem."
An estimated 43 million people are carrying student loan debt. Studies show the average debt at graduation is about $30,000, an increase from $10,000 in the early 1990s, CNBC reported. By 2022, student loan debt could swell to $2 trillion.
"We are seeing a crisis," Zibel said.
The majority of student loans — about 92 percent — are through the federal government, while the remaining number are private loans, including from banks, according to the U.S. Department of Education. But prior to last decade's economic recession, about 25 percent of loans were made via banks, with the federal government agreeing to take on the risks of those loans if the borrower defaulted.
But in 2010, Democrats in Washington led an effort to overhaul student loan programs and effectively cut out commercial banks from the market. Banks can still make private loans, but they are no longer guaranteed by the federal government and can cost borrowers more in interest than government loans.
In 2017, private student loan debt amounted to $64.2 billion, according to MeasureOne, a higher education data and analytics firm.
The surge in student loan debt can be attributed to several factors, experts say, including that the money may take years or even decades to pay back, and a rise in for-profit colleges, whose students are more likely to need loans.
Researchers at the Brookings Institution, a Washington-based think tank, said in a report last year that nearly 40 percent of borrowers may default on their student loans by 2023.
That could throw many people into a deeper financial hole causing their credit scores to plummet, which would block them from getting other loans or they could even face wage or IRS refund garnishment, Zibel said.
"If you don't have money, then how do you get to work," he added. "And if you can't get to work, how do you pay off your student loans?"
Sandy Baum, a nonresident fellow at the Urban Institute, a Washington-based think tank, said statistics show that black and lower-income students are hit harder by debt obligations because of the lack of generational wealth and that they face higher odds of staying in college and earn less income after graduation.
According to the Brookings Institution, debt and default among black college students is at "crisis levels," and black graduates with a bachelor's degree default at five times the rate of their white counterparts and are more likely to default than white dropouts.
"There's a lot more we can do to help students who are struggling," Baum said. "They should be on income-based payment plans, and that type of system needs to be strengthened."
How to handle student debt has become a major issue among 2020 Democratic candidates, with several endorsing Sen. Bernie Sanders' College for All Act in 2017, which would eliminate undergraduate tuition and fees at public colleges and universities as well as lower interest rates on student loans and allow for the refinancing of loans.
Politicians have also criticized student loan companies, some of which have faced a growing number of lawsuits by states and consumer advocates who accuse them of forcing unnecessary interest payments and failing to tell students about income-based repayment programs that would lower payments.
"We owe it to students that when they have to repay a loan, it's easy to understand and fair," Zibel said. "Not everyone is going to be lucky enough to have something as generous and amazing as your student debt getting cleared."