Ever wonder if college evenworth it? Everyone,if not talking about it, has at least heard about the student loan crisis andthe negative effect it’s had and will continue to have. According to the article “Student Loan Debt In 2017: A $1.3 Trillion Crisis” Zack Friedman the founder ofMake Lemonade, there are more than 44 million borrowers with $1.3 trillionin student loan debt inthe U.S. alone.
and is rising by the minute” The average student in the Class of 2016 has $37,172 in student loan debt. This realization isconcerning to all involved. The article “It’s Time to Broaden the ConversationAbout the Student Debt Crisis Beyond Rising Tuition Costs” states “This student loandebt crisis is a subject of increasing consideration, research, and analysis byfederal government agencies, nonprofit organizations, economists, and the studentswho carry the balance.” Individual cost for a collegeeducation keeps climbing higher and higher while Financial assistance hasdeclined by 26 percent from the mid 1990’s.
“The averageannual fee for a public college in the US is now $9,700, while private IvyLeague institutions command massive sums of almost $70,000. This is in acountry where the median annual salary is $50,000.”The number of dropouts with federal loans at theseinstitutions has grown from 35,443 in 2007-09 to more than 56,600 in 2013-15.In that time the median student debt at most schools more than doubled. And moststudents who leave school don’t make it back. A study of the California StateUniversity system found that only 30 percent of students who drop out re-enrollat their original college. https://www.
pbs.org/newshour/education/students-school-debt-no-degree-get-stuck-pugatoryTuition is not the only reason for the student debtproblem. So beyond cutting tuition, another fraction of the debt that needs tobe considered and controlled on is the fact that students are also borrowingmoney for cost of living and depending on the school living expenses such asroom and board can easily amount to $20,000 or more per year.
In aninteresting article to Washington a doctor writes – “First, I was 32 years oldas I began training and I now had over $230,000 in debt. Had I invested mytalents in other pursuits such as law school, I would not have built up thislevel of debt. Also, as I did not start saving when I was younger, financiallyspeaking, I have lost the past 10 years without the ability to save and investto earn compounding interest.
“https://www.google.com/search?q=debt+images&rlz=1C1CHWA_enUS632US632&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiTm-PnxYPYAhVMct8KHQ5cAQQQ_AUICigB&biw=877&bih=419#imgrc=vGHS2rpNAMHVNM: In another statisticGeorgia’s public colleges and universities between 2013 and 2015 108,000students withdrew with thousands of dollars in federal student debt but nodegree. “The numbers of students with school debt but no degree is large enoughthat the financial impact goes beyond individual struggles and weighs on thestate’s economy.” Unless the current condition is dealt with, the US will beleft with many young people crippled by a debt they are probably not going tobe able to pay back, which will result in a depleted economy.
The studentloan bubble generation if more than half their salary is going towards studentloans which means houses, cars etc. aren’t being purchased. By 2025,more than 60 percent of Georgia jobs will require some kind of post-secondaryeducation, and now only 45 percent of the state’s young adults meet thatcriterion. Students entering the work force are realizing that there are no jobsin their fields, forcing them to take low paying jobs but not making enoughmoney to pay their loans.
Repayment rates for loans are lower for students whowithdraw from college compared to those who graduate, according to federaldata. Careerchoices, as well as achieving other financial goals, such as saving forretirement are being negatively impacted by the excessive amount of studentdebt. More and more students areexperiencing depression at the uncertainty of their future. . I have seen 1sthand evidence that this can make someone depressed According to the article “The student loan bubble threatens to burst” Rachel Connolly states that student loandebt in the US has shot up by over 170 percent in the past decade. This debt hasgrown primarily by a lending system that is lending money to18-year-olds whohave no financial knowledge, no credit history and no reason to educatethemselves on basic things like interest rates, how the loan will get paid orthe amount of time it will take to repay the loan.
This regulated practice fromthe lenders is being compared to the “global financial crash” by the Business Editor ofthe Financial Times, Rana Foroohar. As a result, young people like my son findthemselves not being able to afford to live on their own let alone buy a home,so they end up moving back home with parents. Even worse, the ripple effects this would have on the economy shouldcause concern for all. Consumer spendingwill diminish. The US economy is being substantially impacted by the increasein student debt. Presently default ratesfor school loans are at an all-time high, higher than those of credit cards,car notes and even mortgages all due to lenders collecting from studentsregardless of salary.
Unfortunately, as well as troubling, this is the onlykind of debt for which this is the case.According to Donald M. Feuerstein in the article “What Is Driving the Student-Debt Crisis?” He states “Twenty-sevenpercent of loansin repayment are delinquent, and most of them are expected ultimately to default,threatening hundreds of billions of dollars in taxpayer losses and creatingmillions of financial basket cases for our consumer-based economy.” Yes, there are similarities tothe housing bubble and the current student loan system: both involve moneyeasily lent to susceptible borrowers to enable them to buy a product that is quicklyincreasing in price, but with uncertain returns. If this bubble burst, there is going to be a big mess,resulting in a lot of personal debt and lack in consumer spending.
Change willhave to be put in place by policymakers and employers to carefully deflate thebubble. Like the role of housing in the run-up to the globalfinancial crash, the value of a university degree may now be overinflated, butuntil the bubble bursts, it is hard to see why students would stop buying intoit.Changeslike the increased “student grants”, financial aid,default rates, total reliance on federal aid, income-driven repayment plans,lower interest rates and forgave unpaid balances at maturity” were implemented withoutconsidering what effect this would have on the economyThesechanges might ease the burden temporary but will not solve the problem In fact,government funding might actually drive institutional spending up, shifting theburden over to the tax payer “The write-offs in IDRPs even fall outside the government’s 10-yearbudget-scoring window, adding to the national debt without any fiscalaccountability.” Although higher education does open somedoors to financial future the average income for students once they’vecompleted school has not kept up with the rising tuition cost. Add to this tothe reduction in government support, really leave families no choice but borrowmore and more money.Even though students canobtain federal student loans fairly easy some students have chosen to getprivate loans in order to complete their education not considering all theramifications such as variable rates, limitations on deferment etc.
that comeswith going thru a private lender. Nonetheless, as long as young people believe that peoplewith degrees earn more money than without they will continue to pursue acollege education regardless of the risks associated with student loans The article also suggest that one possible fix would be howemployers and society view degrees. If employerscan entice enough young people away from the student debt trap by consideringqualifications instead of, or as important as college degrees would relievesome of the pressure the economy is currently feeling or better yet theprevention of a total crash.Therefore, instead we need to come up with real solutionsto change the future of education and how it impacts students, businesses andsociety. Several ideas running throughmy head would be to eliminate a lot of the four-year degrees to 2-year degrees,the development of employer sponsored apprenticeship as well as a 2 yearmandatory enrollment in either the military or Peace Corp all relating to thedesired field or career path.Yes, ultimately it is theresponsibility of the student to fully understand what is required and fulfillthe commitment made. But we all havecontributed to the impending burst, therefore we all need to help findsolutions and ensure that this does not happen again.
Parents and students needto get educated so that good decisions can be made on behalf of the students,lenders need to be held accountable for their carelessness in loaning money outas well as questionable lending practices and universities need to reformtuition cost.