Student debt is reshaping the economy and is negatively impacting the lives of over 44 million Americans. There is currently over $1.3 trillion owed in student loans, $620 billion more than is owed by total U.S. credit card debt.
Student debt is a crippling issue, and if the U.S. doesn’t act soon, it will paralyze the nation’s economy.
The average Class of 2016 student owes $37,172 in loans, a six percent increase from the previous year, according to FederalReserve.org. The average amount owed has steadily risen for decades at a pace that far outweighs the minimum wage and average salaries throughout the nation.
Part of the increase stems from the fact that more people are going to college. Enrollment increased by 31 percent from 2000 to 2014.
But unlike our grandparents and even our parents, a college degree is no longer a privilege, it’s a necessity. Professions screen for higher credentials even when they are not necessarily required thanks to the “credentialism” trend.
A struggling economy leads to higher competition for jobs and obviously the most educated person will be chosen over the other applicants. In many cases, even a degree isn’t enough to open doors, but it is inarguably more difficult without one.
College is no longer a choice, and for many that means they rely on loans to help them pay for the degree. Then they spend the next 10 to 25 years paying it off.
And students know this going in.
It’s caused many to pursue careers in the STEM fields rather than follow their passions in education, art or history. Students are going into fields that offer financial security and later find themselves unhappy and unfulfilled.
Unless they land an extremely well paying job right after graduation, they are shackled to their debt for a large portion of their adult lives.
According to the Federal Reserve, fewer 30-year-olds are buying houses, with the greatest decline in those with college debt. Graduates also aren’t taking the risk of being entrepreneurs, which is causing a decrease in small businesses, the backbone of the American economy.
When the majority of every paycheck goes toward rent, groceries, car payments, insurance and student loans, there is no room to invest.
Some believe the answer is to have individual states support tuition-free universities.
New York agreed to adopt this policy Friday. The tuition subsidy will have to be covered by either raising taxes or cutting funding elsewhere, and students are expected to remain working in the state for two to four years or else they will be sent a bill.
Others believe the U.S. should make college free across the country, like it is throughout Europe, by having a flat tax that pays the tuition. If everyone had the opportunity to go to college, more people would become educated, which in turn would boost the economy.
Perhaps the solution is in reducing the interest rates tacked onto loans that cause students to spend just as long paying interest as they do paying back the money they actually borrowed.
Maybe the answer is for the minimum wage to be raised to help even out the scale between students who work and the bills they pay at the beginning of every semester.
There isn’t one right answer, but the U.S. has to do something, and soon, or else the economy will continue to decline and students will forever be tethered to the insurmountable piles of debt they accumulate while working toward a degree.