Ensuring Americans’ access to quality higher education is a critical piece of the U.S. economy’s success. A higher education is one important pathway to the middle class and making it available to more Americans leads to a strong, diverse, and globally competitive workforce. Yet, student loan debt can act as a barrier to entry into the middle class, denying many borrowers the ability to build wealth, save for retirement, and support a family.
Recognizing these challenges, the Biden-Harris administration has overhauled the income-driven repayment (IDR) system to give millions of middle-class borrowers the relief they need to pay back their loans in a sustainable way. The administration’s actions will give full credit for the payments borrowers have already made, while also introducing the Saving on a Valuable Education (SAVE) plan to reduce IDR payments going forward.
Accurately counting past IDR payments is expected to forgive the loan balances of 804,000 borrowers. Additionally, the new SAVE plan will reduce monthly payments to $0 for an estimated additional 1 million borrowers, and lower payments for many others. Together, these efforts represent a common-sense way to reduce student loan debt and open more pathways into the middle class.
Higher education still represents a reliable pathway to the middle class
Students today are forced to take on debt in order to access pathways to the middle class. While there is no broadly agreed upon definition of what income level represents the middle class, some researchers have defined the middle class earnings range as between 66% and 200% of U.S. median earnings. According to the U.S. Census Bureau, median earnings for individuals working full-time, year-round in 2021 were $56,540 which would put the middle-class range for these workers between roughly $37,316 and $113,080.
Many educational pathways to middle-class earnings often cause Americans to take on student debt. For example, full-time year-round workers with some college education but no degree ($49,163) or with an associate degree ($51,546) fell within the middle-class earnings range in 2021, but were still below the national median. Workers with a bachelor’s degree ($71,819) or a master’s degree ($87,057) sit comfortably within the middle-class earnings range and above the median. Meanwhile, median earnings for those with a high school education were $41,742 in 2021, right by the lower bound of the middle-class earnings range. Since the median represents the mid-point in the earnings distribution for any given group, this means that a significant number of those with a high school education do not earn enough to be considered middle class.
