Student loan crisis

 

With record numbers of young people today going to college yet unable to find a job when they graduate, many people have started to question if it still makes sense to take out loans to get a college degree. While it still holds true that a typical college graduate will out earn a typical high school graduate, the amount of debt that students have to take on to get that degree has increased exponentially over the past several years, causing many financial experts to voice the opinion that there is a looming student loan crisis.

In fact, the average student graduating with a Bachelor’s degree today has over $24,000 in student loan debt. This includes both private and federal loans, such as direct loans. This amount increases for students with Master’s and professional degrees. Unlike other loan, such as mortgage and credit card debt, it is practically impossible to discharge student loan debt during a bankruptcy. In fact, according to cashlendupfast.com , in 2016 just 39 bankruptcy cases out of 39,000 cases filed had their student loans discharged.

High loan amounts combined with the fact that these loans cannot be discharged has made it extremely difficult for many former students to make the minimum payments on their loans. Unlike practically every other loan that is given to an individual, there is no vetting process for student loans. Essentially, students are encouraged to take as much as they want, and are often told that they will make enough later on to pay off the loan easily.

In actuality, students are graduating tens of thousands of dollars in debt, and in this poor job market they have very few opportunities to make enough to pay the money back. Furthermore, student loans tend to last for years. While the standard loan term is ten years, many people defer and extend their payment terms for much longer. Many people report paying off their student loans about the time that they need to send their own children off to college.

In fact, several famous people have stated they struggled with paying off their student loans. Most notably, President Obama mentioned during his first campaign that he and his wife struggled with student loan payments until the publication of his first book made it possible to pay the loans off in full.

Unfortunately for many former students, this has led to high levels of student loan defaults. These high levels have caused many experts to declare student loans the new banking crisis, and propose drastic changes to the student loan system.

A recent conference at the American Enterprise Institute discussed the issues currently facing student loans and proposed several solutions to the crisis. Panelists at the conference advocated placing an upper limit on the amount that students would be allowed to borrow. While it is believed that this may limit the opportunities for some students, the protection such a rule would offer far outweighs this risk, according to the panelists. There were also recommendations for ways to control college costs, including a recommendation that federal and state governments resume their support of higher learning.

The current state of student loans resembles the state of mortgages before their recent bust. Too many people have taken out loans that they cannot afford to pay back for an asset that has no value to anyone else. A former student, after all, cannot sell their diploma to pay off their loan. This means that some solution is needed in order to allow the current crop of graduates to get some relief on their student loans while insuring the stability of the student lending industry.