Student loans have spiraled out of control within the last few decades and this is negatively impacting our society. The average of obtaining a degree at a public four-year college is $9,300 and has been steadily rising by four percent since 1985. This trend is most likely going to continue the way it is and all the while the median family income remains stagnant or even slightly decreasing. This has led the students of today to take out more loans and just keep adding onto the growing student debt bubble. This early debt can take a heavy toll on any savings for retirement, plans for homeownership, or a possible rainy day fund.
Students today will become the engine that runs this country and student loans make it next to impossible to make it out into the real world. Student loan debt affects all adults across the income spectrum. Twenty percent of people in households with an income below $25,000 have student loan debt, as do the 18 percent of people in households with income over the six-figure mark. The chances of an individual having student loan debt decrease vastly with age. Overall, 27 percent of Americans with some college experience have student loan debt. The numbers range all the way up to 56 percent for adults ages 20-29 years old.
The economic recession and the way society has evolved since then make it so that student loans are targeted towards a younger audience. Added on, over half of people with student loans are worried about repayment regardless of income. The cost of tuition has been on the rise since the 1980s and has been regularly outstripping growth in median family income. After adjusting for inflation, the cost of tuition has more than tripled between 1973 and 2013. The slow recovery since the recession has accelerated this increase substantially and this reality forces students to take on staggering debts.
The average debt load is near $30,000 and is the equivalent of a new car. This is compared to 20 years prior, where students typically graduated with debts amounting to $10,000 on average. This suggests that the decision on tuition costs does not have the students in mind. This is, even more, apparent in a private institution where a “winner-takes-all” society dominates. Competing intuition choose to maintain and increase quality by spending excessively, not by increasing efficiency, reducing costs, or reallocating funds.
Rising tuition cost has made obtaining a college degree a standard and is similar to a requirement to live comfortably. The larger income potential is the most significant and clear reason to earn a college degree. Every degree provides a considerable increase in annual income and this is evident when lifetime earnings are on average $1 million apart depending on one’s education. The expansion of job opportunities is another factor when obtaining a degree and tells employers some of your qualities before the interview. This ups your value as a professional and, in turn, increases your pay in the end.
While high school graduates typically look forward to entry-level jobs in unskilled positions, college graduates will qualify for a broader range of higher-tier career positions and higher paying entry-level positions. Essentially, more doors open with each degree earned. According to the Bureau of Labor Statistics, the median weekly earnings by educational attainment for high school graduates is $668. Students with a bachelor’s degree averaged at $1,101 and advanced degrees reaching up to $1,386. There is a clear and large difference between the weekly income and this stresses the importance of a college degree.
College degrees also provide job stability as employers may cut jobs at lower tier positions during economic downturns. This varies with the type of job, however, unemployment rates among graduates are considerably lower than employees with only a high school education. Studies have indicated that graduates have a greater likelihood to receive better employer-provided benefits. This is very much so apparent in terms of health care coverage. College Board produced a 2008 report showing that estimated a 70 percent of individuals received health insurance due to their four-year college degree.
On the other hand, only 50 percent of employers provided the same benefits for people with a diploma. This again stresses the importance of a college degree and the diverse effects it can have one a person’s life. Student loans have resembled something of a requirement for low-income households to pursue higher education. At the same time, these loans may in turn be counterproductive with all their consequences. Student loans, unlike other forms of debt, doesn’t simply result in bankruptcy, but instead continues to accumulate until paid off.
This often spells disaster for new graduates and negatively impacts multiple aspects of an individual’s life such as credit score. Federal loans seem to be the safer options compared private loans, but in reality, still come with serious consequences on default. These penalties include wage cuts, loss of tax refund or social security checks. While private loans can have alarming increases in interest rates as they are not fixed. This added onto fewer options to reduce or postpone payments and less flexible repayment options create a “choose your poison” situation.
While some borrowers may never run into any problems with their loans, the mere existence of accruing debt may affect a student’s important life decision. A survey recently conducted by American Student Assistance (ASA) found that debt has been delaying major decisions such as buying a home, marriage, having children, saving for retirement, or even entering their desired career field. Student loans were created to be an engine for social mobility but are actually limiting the capabilities for a young adult to be financially successful.
The survey results show that 27 percent of respondents found it difficult to simply buy daily necessities because of their student loans. Sixty-three percent said their debt affected their ability to make larger purchases such as a car and a whopping 75 percent showed that their ability to buy a house was severely affected. One survey respondent even goes to say, because of student loan debt, “Upon graduation you realize that you can’t really begin the life you imagined having after college. ” In conclusion, student loan debt has reached $1. trillion and this hurts not only the economy but the students as well.
There is currently no efficient solution to solving this growing bubble and alternatives like repayment plans only increase the total amount in the long run. Students are unable to jumpstart their lives in the real world due to student loan debts and this will hurt America’s economy. The combination of a debt that exceeds both auto and credit card loans, a workforce hindered by debt, and a growing bubble will most likely lead to another economic downturn.
