For several decades, Americans have known that the country is riddled with credit card debt. Also, over the past decade or so, excessive government spending has resulted in an incredible national debt exceeding $10 trillion! With everyone so focused on these two problems, many have yet to take the time to notice the next large debt and financial crisis on the horizon: Student loans.
Some Background on Student Loans
Since the beginning of the second half of the 20th century, students have been told that the greatest way to achieve success in life was to attend college. Frankly, that made sense at one point: They not only had an opportunity to learn a trade, but could also get a certification that would be trusted by employers. With these in conjunction with one another, students who attended college were almost guaranteed employment and future success.
However, while this was very much the case for a little while, the college trend continued: Every year, more and more students decided that college was their best – and only – option. With such incredible demand, hundreds of colleges across the nation began to raise their tuition cost. The trend has continued to this day, with nearly 70% of high school graduates attending colleges which have seen a tuition inflation rate of over 6%. With increased attendance and tuition prices, however, has come an incredible combined student loan debt of nearly $1 trillion.
Picture Credit- The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back- The Student Loan Scam is an exposé of the predatory nature of the $85-billion student loan industry. In this in-depth exploration, Collinge argues that student loans have become the most profitable, uncompetitive, and oppressive type of debt in American history.
The Current Problem
Despite the fact that many politicians and parents want all students to attend college, doing so has actually proven to be a major contributor to the problem. The problem itself, however, is intertwined: Roughly two thirds of students who attend college walk out with debt ranging anywhere from a few thousand to hundreds of thousands. Although the average is around $20,000 and rising, this still puts a significant financial burden on the student. This, unfortunately, has led to two major problems:
- Graduates have limited spending power, thus hindering the economy and decreasing demand for goods. With so much debt, many students end up having to spend many years of their life scraping by while devoting a majority of their fiscal resources to repaying their student loans. As a result, they hurt the economy by being unable to spend or invest their incomes.
- Fewer employers are willing to hire because of the economic downturn.Since less spending leads to less revenue for companies, employers are finding themselves cutting back on resources. As a result, an increasing number of graduates are unemployed.
These problems coupled with a combined debt of nearly $1 trillion have made it seem like the student loan disaster is truly inescapable. With the United States not allowing student loan debt to be written off during bankruptcy, it’s safe to say that college debt will turn into America’s next great fiscal crisis. Although this may be unavoidable, future students can start doing a few things to ensure that the trend doesn’t continue.
Solutions to the Problem
Students and citizens alike can do plenty of things to not only help themselves, but also prevent the continuation of the crisis. One of the most effective solutions is to simply avoid debt, but this primarily involves saving. Although saving is an essential life skill that should be encouraged, it can still be a difficult thing to do for the average college student. Other solutions involve frugality, such as attending a community or public college for two years before transferring to a private university. Students can also work towards merit-based scholarships and aid that don’t require repayment.
From a legal perspective, the size of the crisis could be greatly reduced by passing consumer protection laws for student loans. Colleges could also lower their tuition out of generosity, and students themselves could begin to look for alternatives to a college education.
This article was written by Karl Stockton for the team at