Nate Galt | United States
This country is facing a major economic crisis- 1.5 trillion dollars of unpaid student debt. The next generation of college graduates will have hundreds of billions of dollars in borrowed money, most of which they will never be able to repay. After home mortgages, student debt is the second-highest type of consumer debt, higher than credit card debt. With solutions to student loans being thrown around on the campaign trail, it’s time to talk about the future.
The Student Debt Crisis
How Is the Debt Accumulated?
The average debt accumulated by students is $38,390. The number of students in debt from their loans continues to skyrocket and has grown over 150 percent over the past 11 years. As more Americans pursue a college education, many will need to borrow money in order to afford to go to school. In a lot of instances, graduates cannot afford to pay off the entirety of their loans. Many choose to defer their payments; however, interest on those loans will continue to accumulate.
In many cases, deferment is the fault of the schools. Some colleges and universities encourage deferring payment while knowing that it is not the best option for their graduates. If a school wishes to secure federal aid for tuition, it must show that students will not default on their loans after three years or fewer. Therefore, schools want graduates to postpone paying their loans in order to protect their own interests while failing to warn people about the disastrous consequences of making such a decision.
A Future Full of Debt
The Federal Reserve conducted a study which showed that student loan debt can impact someone’s decisions about homeownership, marriage, and children. Another study concluded that the debt crisis will be disastrous for the American economy as a result of lower spending and smaller amounts of accumulated wealth over time. The nation needs to work together to find a solution to this complex problem. If the looming crisis of unpaid student loans continues to be ignored, our economy and the future generation will suffer greatly.
Most of us were led to believe that getting a college degree will assure a bright future. While pursuing their interests and passions, many do not consider the odds of financial independence after graduating in their chosen majors.
A college degree opens up new career possibilities with much higher potential earnings. Unfortunately, most students do not understand the full implication of the debt they are undertaking. Few of them have any financial literacy but believe that they will be able to repay their loans within a very short period of time. Schools are disincentivized to provide the best financial advice because it may harm their ability to attract enough students and raise tuition every year.
What Do We Do?
Many solutions to alleviate the student debt crisis have been proposed. Several prominent Democratic presidential candidates such as Cory Booker, Kamala Harris, and Elizabeth Warren have all endorsed the College for All Act written by Senator Bernie Sanders. At a cost of $47 billion, Sanders’ plan would make tuition free at all public colleges and universities for all undergraduate students. It would also lower interest rates on student loans while letting people with existing debt to refinance their loans.
President Donald Trump has said that making student loans more affordable is a priority for his administration. He made a student loan policy plan that would limit monthly payments to one-eighth of a borrower’s income. Beto O’Rourke, a Democratic candidate running to replace Trump, has voiced his support for making public universities and colleges free, stating that, “it will cost us a little bit up front, but it will produce a return far greater than that investment.”
A solution to the debt crisis is desperately needed. If it will not be resolved, our economy will take considerable damage while our future generation will be held down by debt that they will never be able to afford to repay.
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