Since the wake of the Great Recession many people were affected are still struggling to make up their losses. Recession was the pinnacle of the student loan debt crisis. The Crisis not only affects students and parents,but lenders; employers, taxpayers and colleges. The Great Recession cause student loan debt to increase dramatically from about $671 billion to $1.5 trillion at the beginning of 2008.(Katrina) Students being the main victim of the student loan debt crisis are influencing drastic changes in the higher eduction world. Those that graduated college with student debt during the Great Recession are feeling an impact on their lives like never before today. College has always been a lot of people first choice when it comes to higher education.
Most college students in the mid 2000’s weren’t aware of the stock market or how they could be patently affected by it. The average Cost of Attendance at a pubic 4-year university in 2007 was around $18,000. Today, the average public 4-year University Cost of Attendance is at about $23,000 which doesn’t look like a major increase. But what most students don’t think about is, Interest. Most American’s that did attend college during the Recession and years post Recession consider themselves lucky to have a job..to pay for student loans. With students not being able to pay for their loans, find jobs, or even finish school the economy could suffer majorly. Millennial today are choosing not to attend college because of the long term cost. Like many problems in the healthcare industry, finding a solution is very complex.
Higher Education hasn’t always been necessary. Today, if you want consistence and longevity in your income and a comfortable lifestyle it is highly suggested that you earn more than just a high school diploma. College graduates were once considered to be a minority. As the world outside of the US evolved, so did the need for further education. Since only 1% of the United States are millionaires or higher and 35% of the population are working class or lower, student loans are necessary. Not being about to afford education has been a constant issue that needs to be resolved, but how?
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Students aren’t just requesting money for college from the federal government, but are also requesting loans from private institutions to make for what the government can’t cover. With mom and dad only being able to help so much you are left with majority of the bill. With there being some ways to “work off” your debt such as, Public Service Loan Forgiveness where the government forgive’s some federal loans. For many people drowning in student loan debt has become the new generational norm and the resolution is bankruptcy that will more than likely ruin your credit limiting you financially.
Aside from students being affected their parents will be feeling the burn as well Most students starting college have minimal knowledge of what it takes to finance higher education. Which leaves it up to their parents to compensate for their short coming’s. Me at 17 years old compared to me now, at 22 years old with a car that I am financing and college that I am footing the bill for could have had two different outcomes. At 17 years old, you are typical fresh out of high school with no credit, financial plan or money. Your parent being the “responsible” adult they are will more than likely have to take accountably for you when it comes to financing your education.
When Applying for FAFSA the government always asks for your parent’s income if you are younger than 24. Basing your federal loan eligibility off of their income your family could be left with a huge bill. For example; if your University Cost of Attendance in $30,000 and your parents make $90,000 annually you may be approved for a small federal loan that will cover some of your expenses. The good thing about federal loan is they typically have lower interest rates than private loans. Now that the government has given their offer, it is up to you to make the difference. With private loans having credit is required, with you not having credit that leaves mom and dad with the options to that you use theirs, find a cheaper university or not attend school at all.
With millennial’s being the most educated generation in history, many are choosing not to go to attend 4-year universities or colleges period. With the increase of technology more people are choosing to go the trade schools or technical schools opposed to 4-year universities that are usually double the cost of the trade school. With the decrease of student presence at 4-year universities college are have a little trouble with maintaining funding. Students equal money for schools, without a certain percent of attendance university funding will decrease. Attendance is not only important for the student but for everybody on campus.
“From the school’s perspective, they want a steady stream of students and an adequate supply of student loans to allow them to continue to raise prices. The schools will also want to avoid student crisis solutions that could leave educational institutions responsible for unpaid debt.” (Lux) Most lenders will be opposed to increasing student loan consumer protections, and many have significant influence in Washington due to well paid lobbyists and campaign contributions. The lender who has issued the most student loans is actually the federal government. Taxpayers, at least those without student loans, have a couple major concerns with student debt. Many will see the value of subsidizing education for a smarter workforce, but the less federal spending, the better. Second, taxpayers want a strong economy. If student loans are dragging down the economy, this is a problem for the average taxpayer.
“With over 40 million Americans dealing with student debt, it is a large problem. It is also worth noting that the average borrower age continues to increase due to parental borrowing for children, as well as larger loan balances to pay off.”(Lux) Washington hasn’t had much influence despite the growing number of student loan borrowers.
As a group, their financial resources for lobbying efforts are minimal, and student loan borrowers have not shown up at the polls in sufficient numbers to be a significant factor in many elections. Under President Obama, the federal government will no longer give money to private lending institutions. Private lending institutions were a problem when Obama was in office and still are a problem. An action that the Obama Administration has taken is new borrowers will be eligible for student loan forgiveness after 20 years instead of 25(Obama). Money will also be used to fund poor and minority students and increase college funding. The fourth major action they have taken is starting in 2014, borrowers of new loans qualify to make payments based on 10% of their discretionary income, which means the money they have left over after paying for any necessities, such as rent. (Herszenhorn)
Recently, Donald Trump spoke about his position on the student loan crisis. His response was rather surprising, he was appalled that the federal government was profiting off of federal student loans. “That’s probably one of the only things the government shouldn’t make money off. I think it’s terrible that one of the only profit centers we have is student loans.” (Trump) Federal Student Loan programs turned a profit of $41.3 billion in 2013 while many borrowers were struggling to make their financial ends meet. (Wadia)
Trump discussed his solution on how he would help solve the student loan problem by creating more private jobs which is a form of Public Service Loan Forgiveness. “I don’t want to raise the minimum wage. I want to create jobs so people can get much more than that, so they can get five times what the minimum wage is” (Trump). Though Trump seems to have a long-term solution for this problem’s he doesn’t seem to have a plan to help those suffering currently so again, we wait for a better plan to come along.
Besides the government’s many attempts to keep reduce the nation’s student loan debt employers are taking matters into their own hands.
More and more employers are offering to help repay their workers’ student loans as another benefit to attract and retain talent. Private employers are joining many state and local governments, as well as nonprofits, to help more workers repay their student debt, according to the bureau’s report. Employers are offering this help as a benefit, much like helping with 401(k) contributions, and are either paying loan servicing companies directly or through employer-sponsored third-party repayment assistance programs.
“These entities note that student loan repayment assistance programs may be a promising way to reduce borrowers’ overall financial stress, but potential barriers to additional innovation exist,” the authors write. “Industry stakeholders highlight a complex process for making third-party payments driven by student loan servicers’ legacy information technology, all-too-frequent payment processing errors, and the servicing industry’s lack of a standardized process for handling third-party payments.”(Herbert)
