John E. Pytte
The Student Loan Crisis
You may have seen the TV commercials about student loan consolidation. A sign of the times, to be sure. Student loan debt in the United States is increasing. This is due to the fact that financial aid and government grants are not enough to offset the increasing cost of college, and family income has not increased much for decades when adjusted for inflation.. That is another reason more people are being forced to rely on educational loans to continue their education.
The Growing Student Loan Delinquency
A report released in 2015 showed that 11.5 percent of student loans were seriously delinquent. This means that these loans were more than 90 days past due. It is important to note that student loan debt makes up 10 percent of total consumer debt in the U.S. Also worth noting is the fact that 30 percent of all of the past due loans are owned by those paying for college.This figure does not include people are 30 to 90 days behind on their student loan.
Our nation’s total student loan debt is $11.9 billion. At the moment, only half of borrowers are actually paying off their student loan because usually payments are deferred while one is in school, and for other situations like government service, or teaching in high-need areas. Additionally, many people are not paying on their loans that are in forbearance.
Recent presidents and candidates have stated that they have a plan for tackling student loan debt. There have also been talks about letting students attend public colleges tuition-free. We have yet to see a way out in which our young people are well trained for productive professions without being saddled with enormous debt when they graduate and look for work.
It’s difficult to understand all of the factors that have led to the student loan debt crisis. One complication is the high interest rates on student loans. Many borrowers are making their monthly payments on time, but as usual, most of the initial payments is goes towards the interest, leaving the principal at a higher dollar amount for longer (meaning more interest income for the lender).
The Lasting Effects of Student Loan Debt
Students who graduate with debt are 10 percent more likely to delay major life events, such as getting married, starting a family or buying a home. Twenty percent of people have stated that student loan debt has influenced their employment plans. Many people decide to take a job outside of their field simply to keep up with the financial obligations.The issue is impacting families as well, with college graduates moving back home to reduce living expenses.
Others have to either work longer hours or take a second job. People with heavy student loan debt are also more likely to say that the cost of their education was not worth it.
What are Some of the Things That can be Done?
Universities and colleges might need to keep track of the number of students who are graduating with debt. This will allow them to get a better idea of what they can do to curb this problem. They can also make recommendations to students that will help them manage their debt, such as student loan consolidation and student loan counseling. Student loan consolidation allows people to combine multiple debts into one, and possibly lengthen the payback time.
Colleges and universities must also take the steps that are necessary to restrict borrowing. For example, financial aid administrators can put limits on federal loans based on the student's credit hours and major. Students who are going to school part-time should not be allowed to borrow as much as those who are going to school full-time.
Creative use of distance learning, offering their own financing and other innovative means of offering financial aid can be considered in the secondary education marketplace.
Additionally, colleges have to do a better job of understanding the debt that they take on. Schools have to make distinctions between loans, scholarships and grants. People also have the option of getting an income-based repayment plan. This plan allows one to make monthly payments based on his or her income. In some rare cases, student loan forgiveness is possible.
It might seem to be a conundrum- how to offer a non-political higher education that is open to the public without tying it too much to governmental control. Should we all contribute to higher education through taxation, of let the marketplace decide? Both sides of the debate have some validity along with strong differences.