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Student loan debt is becoming a rampant problem in this country. Student loan debt equals nearly $1 trillion and it is monopolized by 10 student loan corporations. There is more student loan debt than credit card debt and is rapidly approaching residential mortgage debt.
An analyst for the student loan industry even admitted that by 2020, they predict that the problem of student loan debt will have a very noticeable negative impact on the US economy.
People in their 20s and 30s cannot buy houses, save for retirement, or even start businesses without significant hardship due to student loans.
Part of the problem is the high cost of undergradate and graduate education. The other part of the problem is high interest rates, even for government loans.
Another problem is unfairness in the student loan system. It has been stripped of all consumer protections, even discharge in bankruptcy. The corporations that run the racket have no reason to change unfair business practices since they are fully protected.
It is not uncommon for people to owe $100,000 or even $200,000 at the age of 25 or 30 at 8.5% or 12% interest rates. Think undergrad, grad school, etc. Currently only 40% of student loans are in active repayment.
It is not uncommon for people to default on these loans. 20% of the loans made in 1995 are in default and student loan burdens then were much lower than 2005- 2010.
There are stories of people owing $500,000 due to defaulting, penalties, and interest fees. They cannot get rid of this debt in bankruptcy and they have had everything they owned seized, their bank accounts seized, and wages garnished. There is very little recourse one has because there are no consumer protections.
Most other countries make interest free or very low interest loans. The interest charges have made young Americans unable to spend money to jumpstart this economy. Normally the young jumpstart the economy. But today, this is no longer possible.
While ostensibly the money will be repaid eventually, forgiving a portion of this debt will give more people more money to spend they would not pay on interest (i.e. unborrowed or unrealized money).
Unfortunatly, once a business gets into a profitable area, it tends to be very good at manipulating the political process to protect its position. Much like health care, any change is going to be opposed by the vested interests which profit from the present system.
Many counties have different models, which may be worth studying, but implementing change in the US is going to be very, very hard.
And the government is only encouraging loan taking to get that college degree.
Yet another money sucking industry born from "going into debt".
Get rid of student loans and go back to cash. Watch those credit hours come down in price once they have thousands of empty classes because kids can only afford one class a semester.
I really wish people would start doing it. Complain while standing in line to get "your loan" doesn't fix the problem.
beyond what the others have posted, a big part of the problem is government and business driving the need for a college degree. why should a bank teller have a college degree? why should people who have limited ability even be thinking about going to college? they should be going to a technical school to learn how to pay bricks, or repair autos, or learn to run a lathe. leave the college degrees for those that are going to be lawyers, doctors, engineers, etc.
beyond what the others have posted, a big part of the problem is government and business driving the need for a college degree. why should a bank teller have a college degree? why should people who have limited ability even be thinking about going to college? they should be going to a technical school to learn how to pay bricks, or repair autos, or learn to run a lathe. leave the college degrees for those that are going to be lawyers, doctors, engineers, etc.
It's all the education-industrial complex and their ties to the public education system for encouraging teachers that the students should go to college at whatever cost.
As for the OP, the problem is the fact that whenever colleges raise their tuition and fees, the federal government matches those fees with increases in the amount of money it loans out to people. Raise fees, no problem. The feds will match it anyway. That's why your fees, like health care costs, keep going up and up. Take away the floor and the costs will drop to the basement.
Another reason why so many students are getting into debt, is because they feel that they HAVE to study out-of-state because so and so college offers this and that degree, when ALL universities in the U.S. have a general education component and they are essentially the SAME. Except in price. Better to do your general education at community college first to save thousands of dollars, but of course some kids think that they have to get those gen. ed. credits at the out-of-state or private uni of their choice or they will be failures, and of course you have also a very large chunk of kids that go to college and dorm up and continue living the high school life x2 with a super high price tag attached to it.
Take the loan interest and grant money and allow the student after graduation to pay the sum in public service related to their degree if the option is available. IE if a kid goes to Dr school then allow him/her to DR at a lower community hospital as part of his/her residency requirement. Lawyers can do Pro Bono work and eliminate the tax paid public defender. A vet can work some if the sum off at a animal rescue or SPCA.
While all the borrowed money should be repaid the interest on these loans is by the Government should be allowed to be repaid in other ways. To many people are in debt and most say that the hardest and highest debt is Sally May.
The medical school scenario is a good idea for that subject: medicine. But what about the countless graduates who study something government has no use for. Think of all the vocational schools you see commercials for during daytime television. They are obviously targeting the unemployed since the majority of their advertising is done during the day. Did you know many vocational schools cost 15,000 to 30,000 per year? That's more than most state universities (for in state tuition)! And these people are hoping to make what - $10 an hour upon graduation? The economics don't make sense. You have on the one hand a service which is paid for by a third party, student loans. And on the other hand you have desperate or stupid people who get talked into paying whatever it takes to get a semi-worthless degree.
Private student loans only became non-dischargeable in bankruptcy in 2005. It was an unwise policy change, and it should probably be changed back, since all it does is motivate lenders to lend irresponsibly.
Private student loans only became non-dischargeable in bankruptcy in 2005. It was an unwise policy change, and it should probably be changed back, since all it does is motivate lenders to lend irresponsibly.
Not only that. Sometimes 2 years into college, they tell the student they will no longer lend them money. This forces the student out of college and a possible default, which nets the loan company even more money (3x more on average).
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