Student Loan Debt

13 Apr
The Unbearable Debt Caused by Student Loans

By Gemma Hunt

College students who are forced to take out student loans to finance their studies, are often told that the investment will be worth it. The Libertarian Party of Washington (LPW) notes that recently, former Secretary of Education and US Senator Lamar Alexander stated that a university degree increases an individual’s earnings by an average of one million dollars in their lifetime. Deeper research reveals, however, that not all degrees are as lucrative as the Senator’s statement suggests. The cost of obtaining a four-year degree ranges from around $100,00 to well over $200,00, yet although official GDP numbers state that the average starting salary for graduates stands at over $48,700, this average is based on all individuals obtaining a degree in any given field. It is estimated that the average student who graduated last year still owed around $35,000; this is $25,000 more than it was in the late 1990s.
The truth is that not all degrees are equally valuable, and most students graduate with an average debt of almost $30,000. Just six months after they graduate, they are forced to pay an average of around $326 every month (at an assumed interest rate of 6.8 per cent with a repayment period of 10 years). Since around 70 per cent of graduates earn less than the stated average, paying this amount monthly can be a big burden that can make the achievement of other financial goals (buying a car, starting a business, investing in a home) an impossibility. Many students cannot rely on anyone to help them with their debt, since often, parents have already invested more than they can afford, or acquired debt to help their children finance their college education.
Student loan debts are not just a worry for the debtors, but also for the government; according to the Department of Education and the Congressional Budget Office, the federal student loan debt stands at approximately $1.2 trillion and is expected to double over the next decade. The issue is a hot button at the moment, as noted by The Libertarian Republic, with Bernie Sanders proposing free college at public universities, Hillary Clinton announcing plans to allocate $350 billion to helping students pay fees, and Marco Rubio insisting that colleges should show the costs and benefits of different majors. Rand Paul, meanwhile, suggests that student loans should be deductible. The Libertarian Republic mentions the case of Robert Murphy, a 65-year-old Bostonian who has filed for bankruptcy owing to his inability to pay his children’s college loans, which amount to over $235,000. The case, which will be heard by a Federal judge, could pose a big problem for the government if Murphy wins.
Student loans can be a good investment for those in particular fields; but for many others, the numbers simply don’t add up. In the UK, students also take out university loans, but since college fees are capped, they often graduate with a much lighter financial burden. Some argue that in the US, universities should lower fees. However, as the BBC rightly points out, many universities in the US charge fees similar in amount to those in the UK, so that lowering fees is not necessarily the panacea some might hope for. Moreover, it could be argued that universities have the right to charge the fees they deem fit, taking into account salaries of top professors, required equipment, installations, etc. Evidently, more technical and specialized courses require more funds to run efficiently.
There is no clear solution to the problem, but its magnitude is such that some think the government should retire from the loan business altogether. Students, too, can consider other options – for instance, studying a trade or studying later in life, once their finances improve. Private investment may also be necessary- e.g. investors may support a student financially in return for part of their salary in the future. More grants and scholarships would also help those who can prove their ability but do not have the finances to pay for a degree. Students should make it a priority to apply for degrees that will most certainly pay back the substantial investment they are making. The extent of the student debt crisis means that they need to plan their future more carefully, for a more prosperous future for all.

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