Student Loan Debt
According to Ulbrich and Kirk (2017), student loan debt now stands at more than $ 1.3 trillion, and it is increasing rapidly. This statistic demonstrates that this problem needs to be addressed as soon as possible. However, how this problem can be addressed has been a contentious issue in America for years. Different proposals have been made, and none of them seem to be fault-proof. This paper recommends the cancelation of some of the student loans in order to lighten the burden the graduates carry and which affect their life outcomes, such as buying houses and starting families. This paper argues that the cancelation of some of the student loans will be beneficial to the United States society, and it will help address the problems affecting the country such as racial and income inequalities and high college drop rate among the minorities.
Why The Student Loan Debt is a Serious Problem
On average, a student debtor graduates from college with more than $ 25,000 in education loans (Addo, Houle, & Simon, 2016). These individuals are expected to repay their loans upon securing a job. Evidently, it will take many graduates years to complete paying their student loans. According to Johnson (2019), the student loan debt has surpassed the accumulated car loans as well as credit card debt. This means that repaying college loans is one of the major expenses incurred by Americans.
Besides, student loan debt is a national crisis since it affects every realm of the Americans Society. For example, servicing student loans means that college graduates are left with relatively low disposable incomes to contribute meaningfully to the economy when it comes to buying cars, houses, appliances, and spending on luxury items and vacations (Johnson, 2019). A person needs money to incur these expenses. However, very many graduates are only left with money for incurring compulsory expenditures, such as food and rent, upon making them monthly payments towards repaying their college loans.
Approximately 45 million Americans have student loan debt (U.S. Senate, 2019). Many of these people are servicing their student loans. However, about 7.2 million people with student loans are no longer servicing them (U.S. Senate, 2019). The failure to pay one’s student loan acts as a stumbling block to a person’s future successes. For example, one ends up having a low credit score, which means that he or she is unlikely to get loans to advance his or her life.
At the same time, the massive student loan debt is a significant contributor to the mental health issues many Americans are facing. According to Johnson (2019), studies have revealed that many Americans who are having problems serving their student loans have some form of mental health problems. At the moment, mental health illnesses pose a significant threat to America public health and economy. A significant proportion of people suffering from a variety of psychiatric problems are young adults who are just starting life. These persons are faced with a myriad of challenges. For example, they want to settle down and marry or get married, start a family, and buy a house and car. All this pressure is exacerbated by the need to service one’s student loan.
Individuals in their 30s are at the prime of their lives (Gleeson, 2016). This is the phase in which a person makes crucial life decisions, such as buying a house. On this note, individuals with student loans have a lesser capacity to buy houses in comparison to their counterparts without a student loan. For example, the Boston Federal Reserve Bank argued that “Homeownership rates for households with student loan debt is always below the rate for households without student loan debt” (Gleeson, 2016, p. 3). Low homeownership has negative effects on the economy.
The fewer the number of graduates who are willing to start a family, the more the country’s economy is negatively impacted by the student loans. Having a family means that one will spend money on baby products and take his or her children to daycare, among other expenses. Moody’s analytics argues that “Each new household formed creates $ 145,000 of economic impact” (Gleeson, 2016, p. 4). As such, lessening the burden graduates have when it comes to student loans will enable these people to contribute significantly to the economy.
Besides, high student loans are affecting people’s ability to contribute to retirement programs. According to Ulbrich and Kirk (2017), “Approximately two out of five US adults (38%) paying off student loans are unable to save for retirement” (p. 1). Older people have high expenditures when it comes to healthcare. Low retirement investments expose these individuals to negative health and life outcomes.
In addition to affecting every realm of American society, the student college loan is expected to increase exponentially. When it comes to the trajectory of the college debt, “Economist project an accumulated loan debt of $ 2 trillion by 2021, and, at a growth rate of 7% a year, as much as $ 3 trillion or more by the end of the next decade” (Johnson, 2019, Para. 3). Already, many Americans and the economy is suffering because of the massive amount of money many individuals owe federal and private leaders as student loans.
The Cause of the Problem
Several factors account for the current problem of high college debt. For example, the rising university and college tuition fee is the major contributor to the problem of high student loan debt. On this note, Ulbrich and Kirk (2017) say that “The average in-state annual tuition for schools and colleges of pharmacy almost doubled between the 2005-2006 academic year and the 205-2016 academic year” (p. 1). The high tuition fees mean that students have to borrow more money to cater for their college education. With time, high student borrowing has created the current problem whereby college debt is extremely high.
In addition to increased tuition fees, the high university and college costs can be attributed to the decreased state support. Between 2008 and 2018, state funding to colleges and universities decreased by about $ 7 billion (Johnson, 2019). Institutions of higher learning require a massive amount of money to sustain themselves in terms of paying lectures and conducting research, among other expenses. When colleges and universities do not get significant support from the government, they do not have any option other than relying on tuition fees as their major source of earnings. Thus, the decrease in state funding has contributed to a significant increase in tuition fees.
Proposed Solution
Numerous solutions have been suggested in an attempt to tame the effects of high student loans. Senator Elizabeth Warren suggested one of these solutions. Senator Warren has proposed a piece of legislation titled Student Loan Debt Relief Act aimed at canceling up to $ 50,000 in student loans for approximately 42 million Americans (U.S. Senate, 2019). The strategy is expected to offer relief for many Americans. The U.S. Senate (2019) argues that 95% of student borrowers will benefit from Senator Warrant proposals if they become law. Also, the proposal allows a person to discharge his or her student loans under the existing country’s bankruptcy laws.
However, the proposal to cancel the student loans of low-earners graduate workers has received mixed reactions. For example, there is a group of people that suggests that the proposal is likely to perpetuate racial equality in the country. The proposal for canceling a significant proportion of student loans will play a crucial role in reducing racial inequality. According to Olivia Golden, who is the executive director of the Center for Law and Social Policy, the bold legislation proposed by Senator Warren will reduce the racial wealth gap in the country, in addition to promoting economic security (U.S. Senate, 2019). The amount of student loan one borrows is, to a large extent, determined by his or her family background. A significant proportion of racial minorities are economically disadvantaged.
According to Addo et al. (2016), studies suggest that young blacks are more likely to borrow money for pursuing their college or university education in comparison to their white counterparts. This means that these individuals are forced by their economic situations to borrow as much money as possible to advance their education. As a result, these individuals end up having huge student loans that significantly hampers them from advancing their lives economically, socially, and politically. At the same time, Nancy Atman, President of Social Security Works argues that the proposals recommended by Senator Warren “Allows Americans to start their adult lives debt free, so that they are more able to pursue their dreams” (Addo et al., 2016, Para. 17). A massive number of graduates are forced to put their dreams on hold in order to service their student loans. Some of the dreams that are kept on hold include starting a family, pursuing one’s talent, or starting a business. At the same time, high student loan contributes significantly to high college dropout rate witnessed in the country, especially when it comes to the minorities. For instance, 69% of African Americans who drop out of college state that they were driven to make this decision by the high student loan debt (U.S. Senate, 2019). When more African Americans drop out of college, racial inequalities continue to persist in the country
On the other hand, there is a group of people that believe that canceling loans will perpetrate injustices to the masses. On this note, the canceled students will require to be paid by taxpayers. When it comes to canceling some student loans, Johnson (2019) argues that “The current proposal for transferring the totality of this $ 1.6 trillion debt to the taxpayers does not pass he fairness test…” (Para. 6). It is unfair for taxpayers who are low-earners to be forced to pay for student debts for people who make more money than them. This is because having a college education increases one’s earnings. Ulbrich and Kirk (2017) argue that having a degree in pharmacy produce favorable return on investment. At the same time, the proposal will encourage college applicants to borrow more in the hope that their loans will be canceled in the future. Instead of solving the problem of high college debt, the proposal suggested by Senator Warrant will worsen it.
In rebuttal, the argument that canceling student loans will perpetuate injustice is ill-informed and untrue. As discussed above, Johnson (2019) argues that canceling student loans perpetuate injustice to low-earners and the taxpayers in general since they are forced to incur the costs of college education that only benefited other persons. However, educated persons contribute to the growth of the economy in many forms, not just by paying their college education. For example, these people are more likely to start businesses that employ more individuals. Also, educated people pay higher taxes once they are employed.
In conclusion, this paper has demonstrated that student loan debt is a serious problem since it affects every realm of American society. As a result, this problem needs to be addressed as soon as possible. This paper has supported an already existing proposal that seeks to address the high college debt by canceling some of it. The argument that canceling student loans will perpetuate unfairness is ill-informed since graduates are the biggest taxpayers. As such, they will contribute indirectly towards their college education. Going forward, more studies should be conducted to assess the extent to which canceling some of the student loans will impact graduates, taxpayers, and the American economy in general.
References
Addo, F. R., Houle, J. N., & Simon, D. (2016). Young, black, and (still) in the red: Parental wealth, race, and student loan debt. Race and Social Problems, 8(1), 64-76.
Gleeson, M. (2016). Student loan debt and the effects on the broader economy. Retrieved from https://jscholarship.library.jhu.edu/bitstream/handle/1774.2/38646/Michael%20Gleeson.pdf
Johnson, D. M. (2019). What will it take to solve the student loan crisis? Retrieved from https://hbr.org/2019/09/what-will-it-take-to-solve-the-student-loan-crisis
The U.S. Senate. (2019). Senator Warren, house majority whip Clyburn introduce legislation to cancer student loan debt for millions of Americans. Retrieved from https://www.warren.senate.gov/newsroom/press-releases/senator-warren-house-majority-whip-clyburn-introduce-legislation-to-cancel-student-loan-debt-for-millions-of-americans
Ulbrich, T. R., & Kirk, L. M. (2017). It’s time to broaden the conversation about the student debt crisis beyond rising tuition costs. American Journal of Pharmaceutical Education, 81(6).