term paper

Topics: Debt, Loan, 529 plan Pages: 8 (1799 words) Published: August 20, 2014

Student Debt

“By making college unaffordable and student loans unbearable, we risk deterring our best and brightest from pursuing higher education and securing a good-paying job.”- Mark Pocan, an American politician who has served in the U. S. House 1. The Macroeconomic Problem:

In the beginning of the 21st century, we have just entered an era where greater education is clearly regarded in the halls of Congress and State Legislators as a nationwide priority worthy of public subsidy, and our elected representatives are willing to support the cause and funding for education with new incentives. (7) Within the past four years, there has been many federal tax law changes that resulted in additional money being devoted to college saving plans than ever before. The total amount of student debt in the United States has tripled in the past ten years, from $363 billion in 2005 to $1.2 trillion today. (3) The most prominent reason is that more students are going to college than they used to, and a greater percentage of students are taking out loans. In 1970, students assembled to college and rapidly increased total enrollment from 8.5 million to 13.8 million in 1990. Schools needed to expand to meet the new demand so as an effect, tuition increased at a rate greater than the increase in the overall cost of living in the late 1980’s. When tuition began to increase at a percentage faster than the general cost of living, many states established large budget deficits. In the late 1980s and 1990s, these budget deficits increased because of tax-cutting measures at all levels of government. To give voters lower taxes, states had to reduce public services. With welfare and poverty programs being first to cut, more cuts were necessary to keep the deficits under control. With that being said, now tuition rates are rising much faster than inflation, but students are paying a greater amount of the costs at public universities than before because states are subsidizing public education less and less. With more individuals going to college, the number of borrowers has increased 70 percent in the past ten years. The amount that the average student borrows has also increased. In 2004, 23 million people had an average balance was $15,651, by 2013, 39 million people had an average balance of about $25,000. 2. Consequences of Student Debt:

The awakening of student debt occurs after graduation, when many students realize their loan debt surpasses any salary they’re able to earn, that is if they can find a job. In a survey, many say graduating from college feels more of a burden, and that would have been better off working, instead of going to college and paying tuition. The Consumer Financial Protector Bureaus student-loan regulator, Rohit Chopr said “Rising student debt burdens may prove to be one of the more painful aftershocks of the Great Recession, especially if left unaddressed.” (2) The student loan problem may have greater consequences for the economy, even worse than the effect of housing problem of 2012. Today student borrowers are postponing major life decisions, like purchasing a home or a vehicle, as a result of their student loans. According to Progress Now Education Network, rates of home ownership were 36% lower among individuals still paying on student loans than those who have already paid off a loan. But it is not just the housing problem that student debt exceeds, the lives of young Americans are at stake for their own future. “My goal in life is to be happy, work hard, and be free. I wake up every day and I think about my loans. My student loan debt is such an oppressive obstacle to my happiness and freedom, that I feel like I can’t start living my life until I’m 35, when I pay off my loans. And even then, I’ll need to take out more loans to earn a master’s degree to earn more money.”– American Student Assistance survey respondent, 2013 The burden of student debt may cause people to make different decisions than...

Cited: Zimmerman, Bill. "How Did College Education Become So Ridiculously Expensive?" Alternet. Alternet, n.d. Web. 05 Aug. 2014. (3)
Korkki, Phyllis
Konczal, Mike. "The Devastating, Lifelong Consequences of Student Debt." New Republic. N.p., 24 June 2014. Web. 05 Aug. 2014. (5)
O 'Connell, Brian. Free Yourself from Student Loan Debt: Get out from under Once and for All. Chicago: Dearborn Trade Pub., 2004. Print. (8)
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