Student Debt
Increasingly in the US today, we are seeing a rise in student debt levels. As of now, this debt stands at $1.5 trillion dollars total, making it the second highest consumer debt category, ahead of auto loans and credit card debt, behind only the mortgages Americans use to buy their homes. This debt is owed by 44 million people, making up over 13% of the US population. 30 of these 44 million people are under the age of 40, and 17 million are under the age of 30. These borrowers each face an average of nearly $30,000 in debt. This debt begins accumulating interest as soon as the borrower takes out the loan, even during college, when the borrower is not working a full time job.
According to this chart, real student loan debt (inflation adjusted) has more than doubled since 1993. With so many of our nations young people swamped in debt, there is a risk to our economy that these people may be forced to defer traditional purchases such as homes and other big ticket items. In addition, it makes it more likely that these people will wait longer to have children, as they will be unable to support them financially. This poses another threat to our economy, as our birthrate is already well below the rate of replacement. One of the key elements of economic growth is population growth, as it drives demand, increases the labor force, and enables more production. Our economy faces a risk of being harmed by both the decreased demand from the indebted people themselves, as well as their potential deferral of children.
As shown by the chart above, the price ofcollege has increased by almost triple in the past 20 years, outstripping not only inflation, but also financial aid growth. The result is the extremely large debt bubble that we are now facing. This increase in student loan debt has been paired with an increase in overall consumer debt. Together, this does not bode well for the economy.
As can be seen in this graph, total consumer debt, excluding mortgages, has exploded since the recession, with student loan debt making up the bulk of this debt. While consumer debt as a percentage of income has actually come down since the crisis, it is still worrying that so many young people are burdened with debt to the point where they must put off major purchases and life milestones such as having children. These actions have not only a social effect on the people themselves, but an economic one, as detailed above. In addition, the system seems to be unique in a way that disadvantages the upper middle class the most. While these people are by all means comfortable, they make too much money to be included in the often generous financial aid that many families receive, but do not make quite enough to cover the cost of college for their children, thanks to the every growing cost of college.
As a high school senior who is about to enter college, I find myself faced with the prospect of student loans to pay for college, and the more I look, the less I like. The growing cost of college is incredibly daunting. I am somehow expected to pay $75,000 for my first year of school, an amount of money that at this point in my life seems quite astronomical. Recently, I was talking to some older people, who recalled that when they went to college, there were no internships during the summer. Instead, they worked construction jobs which would help them pay for the next years tuition. The thought of a summer constructjon job paying for college is laughable at this point. At this point, even the highest paying internships, which can reach $30,000 for a summers work, are not enough to pay for even half of the upcoming years tuition. Another frustrating fact is that in nearly every other country in the world, higher education is far, far cheaper than it is here. For example, a year of tuition at Oxford, a reknowned university, costs about $12,000 per year, compared with Harvard, which costs about $70,000 per year. Doesn’t make much sense, does it?