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The problem of hidden student loan debt

Much outrage has been expressed about the difficulty faced by American college students and recent graduates because of their student loan debt. Since the recession began in 2008, the amount of student loan debt has soared by 84 percent, and borrowers owe a record $ 1.2 trillion. Nearly 40 million Americans have at least one excellent student loan, according to new research from Experian. But is the problem as serious as some believe?

Today, the average student owes approximately $ 28,000 in student loans. That's a lot, but a recent article in Forbes used some comparisons to help put that number in perspective. For example, the average loan for a car in the United States is $ 27,000 and buying a car does not generate the high return on investment that has a four-year college education. The US Census Bureau UU He estimates that, during an adult's working life, someone with a bachelor's degree can expect to earn almost an extra million dollars on average compared to someone who only has a high school diploma. Similarly, the average mortgage loan in the US. UU Now it exceeds $ 280,000. Some observers have suggested that student loan debt can prevent young people from buying cars or homes and, therefore, it is a serious problem. That may be true to some extent, but I argue that the real problem today is the stagnation of wages, which adds years to when borrowers can pay off their student loans and does much more to limit their opportunities in life.

Understand that I am not minimizing the difficulties of student loan debt or the seriousness of the rising cost of education. A college education has become part of the American dream, along with home ownership and apple pie, and rightly so. Years ago, government programs were created to subsidize student loans to honor the belief in higher education and recent proposals to forgive or reduce the student loan seem to echo the same sentiment.

Let's review some recent laws and proposals. A law signed by President George W. Bush to grant the forgiveness of student loans to people who enter the public service for 10 years will begin to help people in 2017. Other officials are working to provide even more support to students indebted Senator Elizabeth Warren (D-MA) developed the Bank's Emergency Student Loan Refinancing Act, which allows borrowers to refinance student debt at the lowest interest rates of today. Such refinancing is already common with mortgages and automobiles, but has not been readily available in the student loan sector. The Obama administration estimates that the bill has the potential to help 25 million borrowers save about $ 2,000 over the life of their loans. Earlier this summer, the bill was blocked in the Senate, mainly because it would require the imposition of new taxes or the loss to the federal government of $ 60 billion in interest payments on student loans over the next decade.

Indeed, although the amount of student loan debt is troubling, it is not the most serious problem faced by college students and recent graduates. When inflation is adjusted, student loan debt has increased, but, as noted, it is about the size of a car loan on average. While horror stories have been reported about individuals who borrowed massive amounts to finance multiple titles in fields that offer few jobs, that problem is related to factors that go beyond the availability of loans. A critical problem today is the stagnation of wages, which makes people take longer to repay loans. Politicians overlook this and often focus on the symptoms of the problem. This diverts attention from the stagnant economy and the reduction of public funds for higher education, which is felt in many states, including Pennsylvania.

Universities play a role in the problem, both to increase costs as quickly as to facilitate situations in which students can obtain degrees that offer few opportunities in the job market. In an age of global markets, where jobs are often mobile and technology has automated many functions, universities have not uniformly adjusted their standard model to ensure that students receive adequate preparation for the job. Although it is fine for university officials to say that they want to educate students for their career and not their first job, it is imperative that universities provide professional skills that allow them to find employment using critical thinking skills and other attributes provided in a traditional education. of liberal arts.

It is also essential that colleges complement the student experience in ways that improve the employability of graduates. For example, a recent Gallup study showed that students who have strong relationships with teachers and mentors have access to experiences that allow them to apply what is discussed in the classroom (through internships, cooperative education and other real world programs). experience). based learning practices) are more successful in their careers and are happier in life. Gallup identified six specific attributes and concluded that only three percent of respondents agreed that they were exposed to all six.

I am not saying that the indebtedness of the student loan should be ignored. It is a problem, but it is less serious than other related problems. It is a symptom of a vicious circle: state governments have reduced funds for higher education, which increases enrollment. Student loans guaranteed by the government provide options for students to face higher college costs. Universities use the increase in tuition revenue to ensure that budgets are met. There is inadequate pressure in universities to emphasize the results of job placement. Students and graduates have problems paying the loans.

We are at a crossroads and we must employ different solutions to address student loan debt. For their part, universities must provide students with the necessary skills to be employed, even if it is required to change the traditional educational approach by adding specialties focused on the career in the liberal arts. The government should support higher education through consistent funding and applying common sense to a variety of government-backed loan programs; for example, allow people to consolidate loans and establish reasonable limits on the maximum amount that can be borrowed with a government guarantee. Society should recognize that some students will benefit more from a technical education program than a traditional university. More importantly, the government needs to stimulate wage growth, as this will reduce the problems of student loan debt much more effectively than the creation of new legislation to forgive debt or the creation of new bureaucracies to monitor universities. .

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