Student-loan debt hit a record high of $1.6 trillion this year, but don’t call it a “crisis” just yet, Dr. Matthew Chingos told Free the Facts during its seventh virtual policy event of fall 2020.

As President-elect Biden mulls over a plan to forgive a portion of federal student loans, the topic is the subject of heated debate. But for Dr. Chingos, a vice president at the Urban Institute, there’s no easy answer to the question of whether all this debt is actually a problem.

“It really depends,” he told the audience.

The well-off can handle it. “For people Zooming from home for work, our jobs are secure,” he explained. “We have a student loan – [and] maybe it remains affordable.”

But others, not so much. “Someone may have a small debt and no college degree” because they’ve dropped out of college, he said. Even though they have a small monthly payment, “they have a low income or they’re struggling in the labor market,” so “that’s going to be a problem.”

That’s the real issue, Dr. Chingos stressed in a 30-minute conversation with Tom Church, a senior policy advisor at Free the Facts: Not all student loans are the same.

“For some people, student loans really open up opportunities,” Dr. Chingos explained. “But for some people they’re a predatory scam.”

So even though student loans have been a worthwhile investment for many college grads, the federal student-loan system as a whole is so opaque and confusing that it is due for a major overhaul.

Dr. Chingos pointed out the irony that we expect students to exercise the critical thinking skills they need to understand how student loans work before they even get the education that’s supposed to teach them those skills. In other words, “You have to navigate a complex financial product in order to get the skills you need to navigate complex financial products.”

As concern over student-loan debt has grown, alternative methods of repayment have gained in popularity. Income-based repayment plans, for instance, require the borrower to pay back a fixed percentage of their income – rather than a fixed amount of money – over a certain period of time.

It’s not a panacea, though. “In theory, it’s great,” Dr. Chingos said. “In practice, it hasn’t been implemented well.” And whether it’s a good idea for you depends on your individual circumstances.

“If you can’t afford to pay your student loans, you should absolutely be on income-based repayment,” Dr. Chingos argued. “Where it gets trickier is, well, you could pay the 10-year-based repayments, and then you could save more for retirement” with the money you’d have left over.

Meanwhile, whether the next administration and the new Congress will take up the challenge of reforming the student-loan system depends on the outcome of the two special Senate elections in Georgia in January.

Although some experts argue that President-elect Biden has the authority to forgive some student-loan debt via executive action, it is an “untested theory,” Dr. Chingos notes.

“If Republicans win Georgia, I could see President-elect Biden saying ‘you’ve boxed me into a corner, and so I’m going to forgive something like “$10,000 in debt as House Democrats have proposed, or $50,000 as Senators Warren and Schumer have proposed, by executive action.’”

But simply forgiving student loans without reforming the system that created them would still be a mistake, he argued.

“I don’t think we should ever restrict access to loans to individual people,” he said. “But we do need to think really hard about restricting access to educational opportunities that are not actually opportunities but dead ends.” Otherwise, we’re providing access to nothing of value.

One way to fix the system, Dr. Chingos argued, would be to simplify the maze of federal programs into one grant program and one loan program.

That way, the federal government could devote more resources to the grant program and fewer resources to the student-loan program, which unbeknownst to many, disproportionately benefits graduate students.

In fact, even though graduate students represent only 15% of all students, they “take out half of all the loans every year.” And while undergraduate students are limited to loans of $35,000 to $55,000, graduate students can essentially get “a blank check from the government.”

Many of these graduate students later go on to high-paying jobs as doctors and lawyers, and so “we may want to rein in some of the graduate borrowing and maybe move some of that to the private sector,” Dr. Chingos said, because “the fundamental right to an education is really on the undergraduate side.”

Whatever the answer, the problem is not going away anytime soon. The COVID-relief bill Congress passed earlier this year allowed borrowers to pause their loan repayments.

“Right now pretty much no one is paying it down,” Dr. Chingos concluded. “We’re not going to see any major policy changes unless Congress gets its act together.”