The Problem With College Debt In America
College debt is one of the biggest growing problems facing Americans today. According to the Institute for College Access and Success, the average person has $30,100 in student debt, which is nothing to sneeze at when trying to enter the working world and get your career off the ground. Furthermore, this problem isn’t going away anytime soon, which means it’d be best if you started studying up on what’s going on.
Student debt is an incredibly complex issue, but one rooted in the basic economic principles you need to assess before investing. While some people decide if college is right for them based on ability, it’s growing to a point where the primary factor is affordability. And if you’re not careful, this can play a significant effect on your future as well. Here’s why:
Growing Price, Less Opportunity
The cornerstone issue with student debt isn’t necessarily caused by an increase demand or accessibility of school, but rather the skyrocketing cost of attending. Colleges know that if a student comes to them with a loan backed by the government, then they don’t have to worry about the bill being paid. The unfair part about this is as demand increases, so does the price, but the quality of the product (I.E. your education) has stayed the same. Essentially, you’re paying for a product that you have no idea if it’s going to provide the same benefit as promised, which is especially unnerving when you consider that the price can rise in between the time you start and finish school.
According to Student Loan Hero, there’s $1.44 trillion in student loan debt across the United States. I’ll note that figure doesn’t include the factors of credit card debt accumulated in school or private loans taken out, which plays a significant role in assessing the financial picture of someone starting their career. Plus, as Lexington Law– a credit repair firm states, it can be incredibly difficult to get yourself out of a hole in college than it is at any other time. And for a budding career, this can be crippling.
Limits Career Options
Perhaps one of the most disturbing thing about our current state of student loans is how much it has separated opportunities amongst classes. An excellent example of this is with unpaid internships, which favor wealthier students. As these programs usually require you to move to another city and live there without getting paid, only those with a healthy savings or parents willing to foot the bill can take advantage of them. Which in such a competitive job market, can put those who really need the income after school at a large disadvantage.
To combat this trend, a lot of students have started to figure out how to develop a hustle while in school. This is beyond just taking on a second job to make ends meet, but rather setting up a foundation that will provide financial stability. And whether the entrepreneur bug has bit you or not, it’d be wise to start considering how to make money on your own as well. Not only has the job market been growing at a slower rate than those with degrees, but the overarching state of student loans could cause a global financial problem in the near future.
A Growing Bubble
Beyond just the personal plague a lot of people face with student debt, a growing issue is how this money is going to be paid back to lenders. Considering that the money is loaned with the expectation that borrowers are going to be able to pay it back by the increased chances of landing a higher paying job, those prospects have been falling short. Quite simply, some economists predict that this could be a bigger problem than the housing crisis, and the evidence is quickly growing to support this claim.
In a piece recently run by the New York Times on student loan debt collection, it’s been reported that at least $5 billion in private loans are currently in dispute over who is responsible for the debt due to missing paperwork over ownership. While that’s a small drop in the bucket compared to the trillions mentioned above, this is a strong cursor that mimics the patterns of the subprime mortgage crisis. Granted, one aspect to consider is that the loans to college students are mostly backed by the government, which adds a level of stability. However, if what’s being predicted is true, then this could play a significant effect on a national level.
With the cost of college continuing to rise, it might be time to think about alternatives for your education. After all, this is all about defining your path to success, which begs the question: do you really need to go to school to be successful?