Is There a Solution to America’s $1.6 trillion Student Loan Debt Problem?
By Elena Chernov
Imagine going to your dream college and working so hard for all those four-plus years. Finally, the day has come your graduation day. You’re smiling and feeling so accomplished. You are feeling so proud of yourself holding that diploma in your hands. That diploma that will land you your dream job. All your hard work has paid off, except for your student loan debt.
You know those loans you have to repay after you graduate. Fast forward, it’s now been 6 months after you’ve graduated. You have a hard time finding a job and faced with $50,000 of student loan debt. What do you do and who’s to blame?
Debt at an All-Time High
As of 2019, student-loan debt is at an all-time high with a national total of $1.6 trillion. According to Student Loan Hero, the average student loan debt per graduating student in 2018 who took out loans was a whopping $29,800. Forty-two million people are in federal student loans.
Many college graduates have bills to pay other than student loans, like rent, living expenses, and car payments. For others, their student debt stands in the way of buying a home and pursuing a new career opportunity.
Who’s to blame?
What is at the root of the student loan crisis? Is it the rising cost of higher education? Is it the students who are unable to pay such huge amounts of debt? Or the system that needs to be questioned? More than half of all jobs paying over $35,000 require a bachelor’s degree or higher.
According to a 2017 paper “Students with debt are less ‘choosy’ on the job market: They are more inclined to accept part-time work and jobs that are less related to their degree and offer limited career potential.”
U.S. Economy at Stake
The student loan debt crisis is hurting the U.S. economy not just students. Millennials are delaying having kids. It is very expensive to have kids in America in today’s age according to Business Insider’s Shana Lebowitz reported. Millennials have taken on at least 300% more student debt than their parents, according to Michael Hobbes of HuffPost.
According to Hobbes, millennials need to work 4,459 hours to pay off four years of college debt, while baby boomers only had to work for 306 hours. According to a survey, more than half of indebted millennial students said going to college wasn’t worth it.
Millennials are delaying buying a home. According to Student Loan Hero, homes are 39% more expensive than they were nearly 40 years ago. According to a recent SmartAsset study it would take four to ten years to save up enough money for a 20% down payment on a home.
While millennials are saving up for a home, they also have to pay all their bills and most importantly rent. “In 1960, the average rent was $71, or $588 in today’s dollars. The current average US rent is $1,700.”
Comedian Hasan Minhaj says, “People are putting off marriage, kids, homeownership, and retirement, especially my generation. He adds, “I’m 33 and growing up it was drilled into our heads that ‘You’ve got to go to college if you want a middle-class job.’
Is There a Solution?
Should student loan debt be forgiven? Economists project an accumulated student loan debt of $2 trillion by 2021. Sen. Bernie Sanders, a 2020 presidential candidate, proposed a plan that would cancel all student debt of 1.6 trillion for 45 million Americans and make public college free. He said that by putting a tax on Wall Street it would raise around $2 trillion over 10 years. According to Forbes, Sanders’ student loan forgiveness plan has no eligibility requirements; all 45 million student loan borrowers are eligible for student loan discharge.
Senator Elizabeth Warren, a 2020 presidential candidate, also has a plan to eliminate student loan debt, “for more than 95% of borrowers, and would entirely cancel student loan debt for more than 75% of Americans with student loan debt.”
However, countries like Australia are helping students with loan debt. They automatically take a certain amount from their check that is put toward their loans.
“If their earnings fluctuate, the system is set up to automatically adjust their payment.” A reform repayment plan can help deal with excessive interest growth.
Reforming the cost of higher education would be extremely beneficial. “The cost of education will double every 14 years and it will take 30 years to make that up in purchasing power.” Researchers found that the “average cost of college for the 2017–2018 school year was $20,770 for public schools (in-state) $40,940 (out-of-state) and $46,950 for nonprofit private schools.”
Although the government tries to make education more accessible for students by subsidizing loans it creates an even bigger problem – inflation. “This has the same economic effect within the education realm as printing money.”
Is there hope for students in heavy student loan debt across this country? With the new 2020 presidential election coming up only time will tell.