Economics

The Student Loan Debt Crisis in 2016

Private-student-loans

Photo Credit: BacktotheFutureCampaign.org

I’m sure the vast majority of the readers of this article can relate very well to the title and subject of this piece. There’s no doubt student debt in this country is a very commonplace hardship for many young adults in this country. While the range of debt for students varies widely, many postgraduates find themselves in an extreme amount of debt that influences their every economic decision on a daily basis, and will for the foreseeable future. For many, this punishment and barrier represents a harsh reality that colleges and governments don’t exactly want you to know about: enrolling in a four-year college in this day and age is one of the most costly investments you’ll ever make. Today, college is a luxury that many working and middle class families cannot afford on their own, which is why many of them are forced to take out student loans.

Just how costly is going to college these days? According to the College Board, the average cost of tuition and fees for the 2015-2016 is $32,405 for private schools, $9,410 for in-state residents at public colleges, and $23,893 for out-of-state residents at public colleges. And that’s not everything, that just covers tuition. Colleges also charge fees for library, transportation, and athletic facilities services. Additional expenses include room and board, as well as books and supplies necessary for any offered college course. Other essentials such as transportation, clothing, entertainment, and personal items cap off the remaining costs. All in all, the College Board reported that a so-called “moderate” budget for in-state public colleges averaged $24,061, and at private universities, the budget averaged $47,831 (to give perspective: at CMU, tuition alone is a measly $65,895)[i].

What do individuals give up by not going to college? A 2014 study by the Pew Research Center indicated that among millennials, age 25 to 32, median annual earnings for full-time working college-degree holders are $17,500 greater than those with high school diplomas only. The earnings gap between college-degree holders and those only with high school diplomas has steadily increased since the silent generation of the 1960s. One of the more telling quotes referring to this study came from executive vice president of special projects at the Pew Research Center, Paul Taylor: “There’s a reason we call this report ‘The Rising Cost of Not Going to College’”. Taylor is right, the ever-increasing salary gap isn’t about college graduates getting paid more, it’s about high school only graduates doing worse than before. “The real story is the collapse in economic opportunity for people who do not continue their education beyond high school”, Taylor declared[ii].

Given the fact that going to college compromises four “easy” payments of about $35,000, just how bad is student loan debt? Probably worse than you already think. Student loan debt has tripled since 2005 according to the Wall Street Journal. In October of 2015, the WSJ reported the national figure for student debt: $1.19 trillion according to the Federal Reserve Bank of New York (FRBNY). The report also cited that nearly 7 million Americans have defaulted on their student loan repayment, meaning they haven’t made a payment toward their outstanding debt, which is remaining, unpaid debt, in one year. According to The Institute For College Access and Success’ Project on Student Debt, 69% of new college graduates from public and private, nonprofit schools in 2013 had student loans. The average debt for these borrowers was $28,400. The FRBNY also found another trend in student loan debt: it’s only getting worse. The FRBNY found that student loan debt had surpassed not only credit card debt, in 2010, but also auto loans, in 2011. This made student loan debt the largest form of consumer debt in America outside of mortgages. Since the peak of consumer loan debt in 2008, no other form of debt had grown other than, you guessed it, student loan debt[iii].

The collected data and statistics on American student loan debt is disturbing, disheartening, and baffling to say the least. From a young age, we are told by our parents, teachers, guidance counselors, administrators, and virtually every other adult in our lives that going to college is the next step of our education after high school, and failing to reach and achieve that critical step will cripple any thought of a successful career. They’re not wrong; a bachelor’s degree is the needed foundation for any chance of a prosperous and growing career in any field. Higher education establishes the groundwork for an economically, socially, technologically, and medically advanced society that benefits us all. Yet how can we, as a nation, continue to punish those that are only doing what is asked of them in the first place? In what other country are young adults financially penalized for trying to achieve their goals by getting an advanced education? In what era were these kind of college tuition prices, which are steadily increased each year, found to be acceptable?

There are plenty of opinions and ideas that focus on trying to solve the student debt crisis we have in America. 2016 presidential candidates offer their own perspectives and policy plans that aim to take on and solve the student loan problem. Democratic Candidate, Senator Bernie Sanders, has supported a plan to make public colleges and universities tuition free, significantly lower student loan interest rates, and allow students to refinance at low interest rates. Sanders’ plan would also require public colleges and universities to meet 100% of the financial needs of the lowest-income students in order to make college debt free. Sanders’ $75 billion plan would be fully paid for by imposing a tax of a fraction of a percent on Wall Street speculation. Sanders cites that more than 1,000 economists have endorsed the speculation tax, and that around 40 countries around the world, including Britain, Germany, France, Switzerland, and China, have already introduced a similar tax[iv].

clinton-collegeDemocratic Candidate and former US Secretary of State, Hillary Clinton, proposed a college affordability and student loan plan, costing $350 billion over 10 years, that would help millions of students pay for college and lower interest rates for those with student loans. Clinton’s plan, called “The New College Compact”, would make community college tuition free, call on states to reinvest in higher education funding, force the federal government to stop profiting off of student loans, and hold colleges and universities accountable for affordable tuition and other costs. Clinton proposes that the plan will be funded by “limiting certain tax expenditures for high-income taxpayers”, or in other words, cutting tax deductions for the extremely wealthy individuals in this country[v].

On the Republican side, presumptive nominee Donald Trump has not made it particularly clear what he plans to do about the student loan debt crisis in this country. However, he has said he believes it’s terrible that the government has profited off of student loans in the past. Knowing Trump’s history it’s difficult to know whether that’s a belief he still holds true today, or one he will tomorrow, or next week. Regardless, it’s an idea that is actually commonly shared on the Democratic side. Another shared idea among all three candidates is the opportunity for college graduates to refinance on their loans. Trump has said it’s unfortunate that graduates come out of college having borrowed so much money to get a degree, and yet find a scarce job market. Once again, the presumptive candidate of the Republican Party for the 2016 Presidential election, an anti-establishment business mogul-turned politician, ironically has supported solutions to the student loan crisis that line up with Democratic Party standards[vi].

Regardless of your party affiliation, or the candidate you support, student loan debt is undoubtedly a national crisis. Major national legislation at the federal and state level needs to be passed in order to substantially change the way that students across the country, irrespective of socioeconomic background, are able to attend college and move forward in their postgraduate careers without having to be handcuffed with momentous debt. Each candidate offers his or her own solutions to the debt crisis, many of which are similar. However, there are clear distinctions between Senator Sanders’ tuition-free plan at public colleges and universities, and Hillary Clinton’s plan to hold colleges and universities accountable for affordable tuition. It’s up to us as voters to choose the candidate that we believe supports and advocates for the most effective policies that can help students of the future, and of the past, reduce or even eliminate the burden of loan debt. Our country’s technological, medical, cultural, and overall societal progress depends on our ability to invest in and provide affordable and quality higher education to every willing student nationwide.


Sources:

[i]http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064

[ii] http://www.usnews.com/news/articles/2014/02/11/study-income-gap-between-young-college-and-high-school-grads-widens

[iii] http://mediamatters.org/research/2015/10/02/myths-and-facts-about-the-college-debt-crisis/205936

[iv] https://berniesanders.com/issues/its-time-to-make-college-tuition-free-and-debt-free/

[v] http://www.politico.com/story/2015/08/hillary-clintons-350-billion-plan-to-kill-college-debt-121210

[vi] https://www.credible.com/blog/student-loans-trump-steers-left-of-rivals/

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