The rise in student loans has become a disturbing national concern. The figure has nearly tripled from just over $5 billion in 2008 to approximately $1.6 trillion in 2019, ranking second in loan debt category, below mortgage loans in the USA, and exceeding accumulated car loans and credit card debt. The outlook does not look good either. Economists estimate that this could accumulate to $2 trillion by 2021, with the potential to grow to $3 trillion if not checked. Besides tuition fees, prices for college textbooks increased by 88% and the cost of school housing increased by 51%, says Connor Hays in an analysis of student debt crisis. Many young adults leaving school will have to work for years to offset these debts. Unfortunately, not many graduates are lucky to find great jobs immediately after school. This means that a good number of them will eventually break under the weight of the debts.
The College Board in New York states that, as of the second quarter of 2018, 7 million federal student loan borrowers were in default status for non-payment. The number of student loan defaulters has been rising as steadily as the debt itself has been growing. In 2019, Susan Dynarski reports that defaults increased because students faced higher tuition payments, they took out larger loans to meet those higher costs, went to for-profit schools, and then eventually entered a labor market that didn’t offer the best prospects.
The facts available clearly indicate that this is not a sustainable trend. It may still be unclear how the financial strain directly affects other aspects of the economy, yet we understand that the quality of life of the debtors will be hampered in their attempt to meet up on payment deadlines. Ironically, the demand for tertiary education (for better living) has not dropped in the USA, yet the student debt crises have dampened the personal progress of many students who have relied on loans to get by academically – which effectively robs them of the ability to save and build wealth. Buying cars and purchasing a home even after finding a job becomes massive luxuries.
Need to Change the Paradigm
The implications do not of course only rest at reducing the value of life, it has an unhealthy impact on the mental health of the students. This was established by Gillian B. White in his article on The Atlantic in 2015. The ramifications of dealing with crushing debts can take varying dimensions, mostly deterioration of mental health and increased stress. This has the potential to adversely affect the students’ performance. Sustainable education is a must-have as it is obvious that the current system is a waiting time bomb: sooner or later, it will explode, and the effects might be catastrophic. The ever-increasing cost of tertiary education in the US has to be checked. Financial aids from the government remains a major source of friction to slow down the ever-increasing student debts in the country.
References
- Zack Friedman (2020), Students loan debt statistics in 2020: a record $1.6 trillion. www.forbes.com/
- John Aiden Byrne (2018), US students may collectively owe $2T in loans by 2021. The New York Post. www.thenypost.com/
- Connor Hays (2018), The Student Debt Crisis. Bloom Economic Research Division, pg. 1-11.
- Lori A. Trawinski, Susanna Montezemolo and Alicia Williams (2019), The Student Loan Debt Threat: An Intergenerational Problem. AARP public policy institute, pg. 1-10.
- Susan Dynarski (2019), Student debt. State of the union, pg. 11-13.
Gillian B. White (2015), The mental and physical tolls of student loans. www.theatlantic.com/