Student Loan Debt, the Price of an education.

By Moral Shock

              Student debt “has surpassed credit card and auto loan debts totals” (Friedman, Dan). Year after year the cost of tuition has increased, while other countries have lowered their tuition and some even offer a free college education. Countries like Argentina, Austria, Germany, Norway, Sweden and Finland are putting their citizens through college with tuition free universities (A Guide to Tuition-Free Colleges and Universities for International Students). But, here in the U.S.A we have the biggest student debt crisis in history even bigger than the house market crash. With one of the main causes has being inflation, which in 2012 U.S. student loan climbed to 58% in just seven years (Touryalai, Halah). That’s a seven percent increase per year in the past decades, and it is set to rise another seven percent in 2020. In 1986 the cost to go to college was $10,000, with inflation the cost has risen to a big $59,800, that’s double the inflation rate of the economy. The rising tuition cost and interest rate can have students in limbo, making it harder to finish getting a degree at a low salary. Stafford loans that are subsidized by the government, doubled from 3.4% to 6.8% in 2014. ProgressNow, a research company, states that it takes twenty years for a student to pay off a loan (Touryalai, Halah). Is charging students to go to college a wise choice for the United States economy?

           Many college students are grabbing student loans with hopes of a better future, without realizing the cost. Sixty percent of graduates are unable to find jobs in their studied field. Many students who become unemployed go back to college to pursue a degree, many times picking a degree that will not change their circumstances. Since the Great Recession, unemployment amongst graduates is higher than before. Federal Reserve researchers in 2012, found that forty-four percent of college grads were working jobs in which no degree was needed, and that most of those jobs paid around $45,000 a year (Crotty, James), which is not enough to cover student loan payments along with living expenses. Many students consider and do move back to their parents’ home in order to cover the monthly student loan payments they have to make. This has caused a major burden in the parent’s life, and if they can’t move in with a friend or family member they must choose between living expenses and paying their student loan bills. This factor can negatively impact the average student’s credit, making it harder for them to maintain independence without some form of family, friend, or government assistance.

        Students are delaying their future life goals such as, starting a business, buying a home, or moving plans as a result of their student loans. Home ownership is thirty-six percent less amongst those repaying student debt (Touryalai, Halah). This can put a halt to the life goals of a student, as they become stressed from wage garnishment. The government can garnish student wages, and taxes if payments are not met in certain loans (Administrative Wage Garnishment). When purchasing a home, for example, the loan officer calculates the student’s mortgage payment, and affordability, by factoring the client’s student loans. Bank loan officers will see a client with student loans as a higher risk client because he/she has additional expenditures every month for an extended period of time, which may cause a person with student loan debt to become unable to purchase a home.

           Every year interest rates increase, making it even harder to qualify for a home unless they find a job that meets the financial income guidelines. Millennials are holding the economy back because they are unable to purchase goods and services which drives the economy. The limited purchasing power of the millennial generation has become huge economic factor that has delayed the recovery of our economy, and contributed to its downfall. This has widely affected the automobile industry, with a loss of six billion dollars in purchasing power due to student loans (Touryalai, Halah).

          If the students are not spending money, the financial market is not moving sufficient enough to help recover the economy. One of the main focuses in the U.S. economy is the market, which relies heavily on the sales and distribution of goods and services. But there is no focus on ending the financial burden for the average American student, which creates a dilemma for a large section of consumers to participate in the economy and spur growth. Free tuition universities would only serve to benefit to the U.S, making the country a strong global competitor. As an example, Germany extended free college education to U.S. students, but those students would have to learn German, apply to admissions, and live in Germany like every other university. That is certainly cheaper than getting into debt from student loans, and this option offers an attractive alternative to our potential brilliant young minds. The U.S. has eleven tuition free colleges, many which are paid for by working at the campus, or just simply by paying room, board, and other expenses (A Guide to Tuition-Free Colleges and Universities for International Students). The benefits of free tuition are many, one very important one being a stronger economy and nation.

Works Cited

Touryalai, Halah. “$ Backlash: Student Loan Burden Prevents Borrowers From Buying Homes, Cars.” Forbes.com, 26 Jun. 2013. Web. 12 Oct 2014.
Touryalai, Halah. “$1 Trillion Student Loan Problem Keeps Getting Worse.” Forbes.com, 21 Feb. 2014. Web. 12 Oct 2014.
Crotty, James. “60% Of College Grads Can’t Find Work In Their Field. Is A Management Degree The Answer?” Forbes.com, 01 Mar. 2012. Web. 12 Oct 2014.
n.p. “Administrative Wage Garnishment.” MyEdDebt.com, n.d. Web. 12 Oct 2014.
Friedman, Dan. “Americans owe $1.2 trillion in student loans, surpassing credit card and auto loan debt totals.” NyDailyNews.com, 17 May. 2014. Web. 12 Oct 2014.
n.p. “A Guide to Tuition-Free Colleges and Universities for International Students.” Scholars4dev.com, 31 March. 2014. Web. 12 Oct 2014.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s