Summary: Student Loan Debt

Problems in the student loan market are not just harming students but are also exacerbating problems with the United States’ recovery from the Great Recession. New York Federal Reserve Bank data has found that outstanding student debt topped $1 trillion in the third quarter of 2013, and the share of loans delinquent 90 days or more rose to 11.8 percent. Furthermore, the share of 25-year-old Americans with student debt increased to 43 percent in 2012 from 25 percent in 2003, while the average loan balance rose 91 percent, to $20,326 from $10,649 (Gage and Lorin). More than 40 million Americans are in student loan debt and because of this, more than 40 million Americans are not able to stimulate the economy as they are not able to buy houses or cars, or start businesses or families (Applebaum). In Wisconsin alone, student loan debt has resulted in a loss of over $200 million annually from new car purchases, while also resulting in middle class households with student loan debt overwhelmingly renting homes instead of owning them (Vanegeren).

With the ever-increasing tuition and ever-tighten federal student aid, the number of students relying on student loan to fund a college education hits a historical peak. According to a survey conducted by an independent and nonprofit organization, two-thirds of college seniors graduated with loans in 2010, and each of them carried an average of $25,250 in debt. (Reed et. al., par. 2). My research question will focus on the profound effect of education debt on American college graduates’ lives, and my thesis statement will concentrate on the view that the education policymakers should improve financial aid programs and minimize the risks and adverse consequences of student loan borrowing.

Here in the United States, there are many forms of consumer debt, which help contribute to the large sums of debt countless Americans find themselves faced with. Directly effecting many college students is student loan debt. Student loan debt is now the second largest form of consumer debt behind housing” declares the Federal Reserve Bank of New York (Grisales). This is due to the fact that student loan debt grew 7.1% in 2014 to $1.2 trillion (Grisales). If this statistic alone is not worrisome this next one is sure to be. The amount of debt in the housing market that helped to spark the last recession was only $1.3 trillion (Grisales). Due to the increased amount of debt required by students to attend college many students are feeling the wrath. According to the U.S. Census Bureau, “In 2014, 11.7 percent of females and 17.7 percent of males between the ages 25 and 34 were living with their parents” (Grisales). The fear of obtaining massive amounts of debt is driving the current generation of student’s to put off many future hopes and dreams. While causing them to move back home to save money. The current student loan crisis is crippling the economy and ruining the lives of American students.

In the United States, it is generally accepted that college (or any form of higher education for that matter) is a wise investment that each and every individual should strive for. Each and every year thousands of parents open college funds and future investment plans to ensure that once their child is of age he or she can participate in quality educational programs. While college attendance rates are at a positive all-time high, right behind it follows an astounding $1.3 trillion dollars in student loan debt. Let’s face it, college is expensive, and it’s only getting worse. Could the outstanding quantity of student loan debt be the next national crisis?

College debt has risen significantly since “The Great Recession” in 2009. Due to the high college fees, students are faced with lifelong debt. If the rise continues, only the rich will be able to obtain a higher education, resulting in American education to take several steps backwards instead of improving. Although many have tried to fix college debt problem, it has mostly gone unnoticed. Specifically targeting the nation’s youth, college debt is destroying the chances of the lasting effects on the economy from fully recovering.

In recent decades, student loan debt has increased dramatically causing a so-called, “education bubble”. This ‘education bubble’ is essentially the ‘housing bubble’ within higher education. The Federal Government, like those in the housing market crash in 2008, are lending money to those who receive a low income and can not afford college. According to The Weekly Standard, “the Federal Reserve Bank of New York reports that during the past decade, student loan debt has nearly tripled and the number of students with debt has risen by 70 percent” (Cochrane). The Federal Government needs to decrease the amount of loans they are giving out in order to prevent another crash within our economy. As a senior in high school who will not be receiving

As the demand for workers with college degrees increases the pile of debt students may graduate with gets bigger and bigger. This problem is America’s next sizeable financial crisis, but this crisis however is avoidable. Student loan debt is a financial bubble waiting to blow up just as the housing market collapse did in 2007, which the country is only just now starting to see signs of recovery from. The cost of a four-year degree has seen increases that surpass inflation and health care costs. Likewise, the amount of student loan debt is now greater than both auto loans and credit card debt. So, the question most frequently asked is, how has this happened?

A decade ago, student loans barely existed. Today, however, American students borrow up to couple million dollars a year to attend college. An entire generation is burdened with debt, and affected by the modern phenomena known as the “student debt crisis.” In recent years, student loan borrowing rates have risen notably, leading to concern about the public financial risks associated with the financial challenges faced by many students. Of late, the United States government has given out about $170 billion in financial aid annually in an effort to encourage students to attend postsecondary education. Such funding are usually supported by research that consistently finds positive and growing average economic benefits of

There is a critical financial trend in the United States: student debt is at an all-time high. For the first time in mid- 2013, student debt rose to 830 billion, surpassing the credit-card debt (Clemmitt). Many economists and scholars compare the student debt crisis to the housing bubble, which resulted in a nationwide recession 2008. In a senate hearing regarding the current student debt crisis, Illinois Attorney General Lisa Madigan said, “The warning signs are there, just like they were before the housing crisis, and congress needs to act before it is too late” (Bidwell). After graduation, many students find it difficult to repay their debt, due to the bleak job market. According to a report published on the financial website Smart money, ten percent student loans borrowers defaulted in 2010 (Clemmitt). The percent was larger for students that attended a for-profit educational institution, like a career college; fifteen percent of these students defaulted (Clemmitt). Although the default rates do not contribute to the increasing student debt, one can compare it to the mortgage crisis when people stopped paying their mortgages and the American economy crashed. This exemplifies the critical problem that the student debt bubble if burst; it can have devastating impacts on the vulnerable American economy. Three causes for the increase in student debt are due to recent trends in college attendance, the increase of for-profit colleges and the rise of tuition due to spending

In the U.S. students are encouraged to earn a college degree, but the cost of an education turns many away. “Driven by the allure of a decent salary with a college degree, Americans borrowed to go to school. Outstanding student debt doubled from 2005 to 2010, and by 2012 total student debt in the U.S. economy surpassed $1 trillion” (Mian, Sufi 167). There are plenty of opportunities to obtain funds for college, including one of the most common, student loans. A student loan is defined as “a common way to fund education, specifically college and graduate school, and they provide educational opportunities that you otherwise may not be able to afford” (Barr). Student debt is at an all-time high in America. Over half of all lower income

“The United States has created a new generation of people that have more student loan debt than at any other time in our history” (Murphey). A vast majority of students are graduating with debt. On average, students are carrying loan amounts big enough to buy a nice car or cover the down payment on a house, but instead of making those investments, or starting a family or a business, they’re struggling to keep up with student loan payments (O’Malley). Student loan debt is a major problem. Student loan debt exceeded credit card debt in 2010, auto loans in 2011, and it passed the $1 trillion mark in 2012.

An estimated 20 million Americans attend college each year, and 60% of those students borrow annually to pay for it (qtd. in asa.org, “Student Loan Debt Statistics”). Moreover, citizens continuing to pay off debt after schooling brings the overall number of student-loan-borrowers to about 40 million- with a collective 1 trillion dollars in debt (McCarthy, “10 Fun Facts About the Student Debt Crisis); a fourth of these borrowers owe over $28,000, a tenth owe over $54,000, 3.1% owe more than $100,000, “and 0.45 percent of borrowers, or 167,000 people, owe more than $200,000” (Haughwout, “Grading Student Loans”). While some view this predicament as the result of laziness or carelessness, the bulk of this substantial group are not at fault.

With the 2016 presidential election looming in the near future, the subject of student loan debt has become a major issue on the campaign trail. The national amount of student loan debt is 1.08 trillion dollars, with 11.5% of that amount in default or in 90+ day delinquent. To put that in perspective, total consumer debt at the end of 2013 was 11.52 trillion .(Forbes, 2014) According to an in class poll, only 7 students out of 169 students were completely confident in their knowledge of student loans. However, if we had lower tuition and expenses students wouldn’t have to take a loan out in the first place.

Tuition and student debt at colleges and universities in America have been rising far more quickly than inflation for over four decades. This is a trend that will continue without intervention. Student debt drastically affects students’ lives and decisions from getting married, to buying home, or to starting a business. The amount of debt held by students after graduating not only negatively affects the individual, but the economy as well. Loads of economic activity is currently halted by students working to pay off their loans. This is a consequential problem and the increasing number of student debt in America must be addressed.

In the United States today, the number of students graduating college with student loan debt is quite astonishing. In the article titled, “How the $1.2 Trillion College Debt Crisis Is Crippling Students, Parents And The Economy”, we will examine and break down the student loan debt crisis by the numbers. Today, almost two-third’s of students graduating college are graduating with an average of $26,000 in debt. For most students, $26,000 is a lot of money when the average annual income for a first year graduate is only in the mid $40,000 a year range. According to the Consumer Financial Protection Bureau, student loan debt has reached a new milestone, crossing the $1.2 trillion mark (Denhart, 2013, Introduction, par. 2). With student loan debt levels