Ever wonder iscollege even worth it. Everyone, if nottalking about it, has a least heard about the negative effect that the studentloan crisis has had and will continue to have. In the article “Student Loan Debt In 2017: A $13 Trillion Crisis” ZackFriedman, the founder of Make Lemonade, states “there are more than 44 millionborrowers with $1.3 trillion in student loan debt in the U.S.
alone,” and thatnumber is rising by the minute. He goeson to say that “the average student in the class of 2016 has $37,172 in studentloan debt.” This realization is concerning to allinvolved. The article “It’s Time toBroaden the Conversation About the Student Debt Crisis Beyond Rising TuitionCost” _______ says “This student loandebt crisis is a subject of increasing consideration, research, and analysis byfederal government agencies, non-profit organizations, economist, and thestudents who carry the balance.” The costfor a college education keeps climbing higher and higher while financialassistance has declined by 26 percent from the mid 1990’s and “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 a county where median annualsalary is $50,000.”The number of dropouts with federal loans at theseinstitutions has grown from the 35,443 in 2007-09 to more than 56,600 in 2013-15. Cite. During that time the median student debt atmost schools almost doubled.
And moststudents who leave school before graduation don’t make it back. A study of the California State Universityfound that only 30 percent of students who drop out re-enroll at their originalcollege. Tuition is not theonly reason for the student debt problem. So beyond cutting tuition, another fraction of the debt that needs to beconsidered and controlled is the fact that students are also borrowing moneyfor cost of living and depending on the school, living expenses such as roomand board can easily amount to thousands of dollars more per year.
In an interesting article a Washington doctorwrites “First, I was 32 years old as I began training and I now had over$230,000 in debt. Had I invested my talentsin other pursuits such as law school, I would not have build up this level ofdebt. Also, as I did not start savingwhen I was younger, financially speaking, I have lost the past 10 years withoutthe ability to save and invest to earn compounding interest.” In another statistic Georgia’s publiccolleges and universities between 2013 and 2015 108,000 students withdrew withthousands of dollars in federal student debt but no degree. “The numbers of students with school debt butno degree is large enough that the financial impact goes beyond individualstruggles and weighs on the state’s economy. Unless the currentcondition is dealt with, the US will be left with many young people strugglingwith the debt they are probably not going to be able to pay back, which willresult in a depleted economy. Thegeneration that has to deal with the student loan bubble will have more thanhalf their salaries going towards student loans which means houses, cars etc.
aren’t being purchased. It was alsorevealed that by 2025, more than 60 percent of Georgia jobs will require somekind of post-secondary education, and currently only 45 percent of the statesyoung adults meet that hiring requirements. Students entering the work force arerealizing that there are no jobs in their fields, forcing them to take lowpaying jobs but not making enough money to pay their loans. Career choices, as well as achieving otherfinancial goals, such as saving for retirement are being negatively impacted bythe excessive amount of student debt. More and more students are experiencing depression at the uncertaintlyof their future.
I have seen this 1sthand, my daughter still struggles with depression because she can’t afford topay her loans and live. According to thearticle “The student loan bubble threatens to burst” Rachel Connolly statesthat student loan debt in the US has shot up by over 170 percent in the pastdecade. This debt has grown primarily bylenders who are lending money to 18 year old’s who have no financial knowledge,no credit histoty and no reason to educate themselves on basic things likeinterest rates, how the loan will get paid or the amount of time it will taketo repay the loan. This unregulatedpractice by lenders is being compared to the “global financial crash” by theBusiness Editor of the Financial Times, Rana Foroohar.”As a result, youngpeople like my son find themselves not being able to afford to live on theirown let alone buy a home, so he ended up moving back home with me. Even worse, the domino effect this will haveon the economy should cause concern for all. Consumer spending will dimish and the US econonly will continue to besubstantially impacted by the increase in student debt.
Presently default rates for school loan areat an all-time high, higher than those of credit cards, car notes and evenmortgages, all due to lenders collecting from students regardless ofsalary. Unfortunately, as well astroubling, this the only kind of debt for which this is the case. According to Donald M.
Feuerstein in thearticle “What is Driving the Student-Debt Crisis? He states, that “Twenty-sevenpercent of loans in repayment are delinquent, and most of them are expectedultimately to default, threatening hundreds of billions of dollars in taxpayerlosses and creating millions of financial basket cases for our consumer-based economy.” Think about that how that will affect you!Are you reminded of something?Yes, there aresimilarities to the housing bubble and the current student loan system: both involvemoney easily lent to susceptivle borrowers to enable them to buy a product thatis quickly increasing in price, but with uncertain returns. If this bubble burst, ther is going to be abig mess, resulting in a lot of personal debt and lack of consumerspending.
Change will have to be put inplace by policymakers and employers to carefully deflate the bubble. Changes like the increased “student grants”,financial aid, default rates, total reliance on federal aid, income-drivenrepayment plans, lower interest rates and forgave unpaid balances at maturity”were implemented without considering what effect this would have on theeconomy. These changeds might ease theburden temporary but will not solve the problem. In fact government funding might actuallydriver spending, shifting the burden over to the tax payer. Additionally, according to Feuerstein ” Thewrite-offs in IDRPs even fall outside the goverments 10-year budget-scoringwindow, adding to the national debt without any fisical accountability.”Although highereducation does open some doors to financial future the average income forstudents once they’ve completed school has not kept up with the rising tutioncost.
Add to this the reduction ingovernment support, really leaves families no choice but to borrow more andmore money and even though students can obtain federal student loans faily easysome students have chosen to get private loans in order to complete theireducation not considering the ramificaitons such as variable rates, limitationson deferment etc. that comes with going thru a private lender. Nonetheless, as long as the thinking thatpeople with degrees should earn mor money that those without, school tuitionwill keep increasing, lenders will keep lending and young people will continueto pursue college education regardless of the risks associated with studentloans. In the article Connally alsosuggests that one possible fix would be how employers and society view degrees.
If employers can entice enough young peopleaway from the student debt trap by considering qualifications instead of, or asimportant as college degrees than that would relieve some of the pressurecurrently being felt by the economy or better yet the prevention of a totalcrash. Therefore, instead we need tocome up with real solutions to change the future of education and how itimpacts students, businesses and society. Several ideas running through my head would be to eliminate a lot of thefour-year degrees to a two year degree, the developmental of more employersponsored apprenticeship as well as a two year mandatory enrollment in somekind of community service such as the military or Peace Corp all relating tothe desire field or career path.Yes ultimately itis the responsibility of the student to fully understand what is required andfulfill the commitment made. But we allhave contributed to the impending burst, therefore we all need to help findsolutions and ensure that this does not happen again.
Parents and students need to get educated sothat good decisions can be made on behalf of the student, lenders need to be heldaccountable for their carelessness in loaning money out as well as questionablelending practices and universities need to reform tution costs
