Student Loan Debt Crisis

            Being able to work in the future means having to go to school. That means taking out student loans. In recent years the student loan debt has skyrocketed leaving many recent grads well below the poverty line even with a sizable income. The student loan debt has reached 44.2 million in the United States alone. The average loan students are leaving school with $39,400 which will grow as they pay interest on the amount they left school with.

• Why so Much Student Loan Debt?

There are many reasons the student loan debt has risen to levels higher than anyone has ever seen. One of the reasons is because the cost of student education and the tools they need to succeed has gone up along with the tuition and room and board. The average cost of a state school is now $25,620 while an out of state school is averaging around $34,740. With a 529 College Savings account student loan debt is almost eliminated. At this point though, only 13 percent of families use one of these accounts to save for their child’s education.

Loan forgiveness is also seen as a potential reason for such student loan debt. The loan forgiven program is run by the federal government which offers forgiveness for students who pursue a career in public service. It is a tempting offer to many students wishing to escape their debt, but the program isn’t permanent and can be altered or canceled making it risky to bank on the government to make the student debt disappear.

The student loan debt crisis has been made worse by the number of borrowers who fail to continue to pay on their loans. As of 2018, 11% of student loan borrowers were at least 90 days or more overdue on their payments or incomplete default on their loans. These numbers indicate that while most students are making their payments on time, many are struggling to keep up with even the lowest rates of payment.

• Who is Carrying All the Debt?

The student loan debt falls most heavily on those that are making the least or if they need more education to pursue the ultimate end to their schooling. Women are found to feel more of the loan debt than men. Women alone are carrying $900 billion in loan debt. That is nearly two-thirds of the current debt in the United States. Women are more likely to seek financial assistance to help with their schooling and tend to borrow more money to do it. This is not a problem until the women graduate from college and enter into a work situation with a gender pay gap.

The gender pay gap prevents women from paying as frequently and accurately on their loans. It also places less of this Burden on their male counterparts who will be doing the same job but making at least 20% more than their female coworkers. Women are generally paid at 80 % of what men are paid and that means they are working with less money and have a harder time making their financial obligations. It also means they are more likely to fall behind and default on their loans. Four years after graduation found that men paid off an average of 38% of their outstanding debt while women were only able to pay off 31%.

With the less income and the higher debt women are less able to save for retirement and feel confident about their finances and their ability to retire when they choose. This also means they have less saved in case of an emergency. Women have an average of $2000 dollars saved to a man’s $10,000. Women have an average of $42,000 in their retirement account to every man’s $123,000.

Minorities are Carrying Most of the Debt

86.8 % of black students take out loans to attend school at a four-year college. Their white counterparts take out half that amount. Hispanic and black students are likely to graduate with more debt and have more difficulties entering into the workforce. This means they are more likely to default on their loans and be less able to save for emergencies or retirement. They are also more likely to be slow on paying off their loans when they are able to pay on them.

• Long Term Consequences of Student Loan Debt

Student loan debt effects more than the student who owes the money. It also affects the companies that loan out the money. More than one company has had to stop helping students go to school because they are unable to loan any more money out. While the rest of the economy is stabilizing from the housing market crash the student debt crisis is just beginning. These students are not able to afford the homes that are now on the market which will potentially delay home-ownership. This will also negatively impact the demand for housing as fewer people are able to buy them the demand will drop and the supply will grow with little demand.

Students carrying large amounts of student loan debt will also be less likely to want to use other forms of credit to make purchases such as credit cards or to take out loans for such things like cars. This will mean less interest for lenders and banks and less revenue for these entities to work with and loan out to those that need or want a loan.

On the good side, more students are attending a school which means the workforce is getting more educated and are better prepared to meet the demands of the future, but the levels of student loan debt will prevent many people from getting beyond their initial college education and be unable to work to add to their accomplishments. Many items older generations take as a rite of passage will be forever out of reach of these people. Finding ways to control this debt is now a priority. Implementing rules and regulations is the only recourse to stop things.