A Debt Sentence: The Growing Student Loan Debt Problem in America

Education is a foundation for success, and in turn, students from all over apply to higher education institutions for a chance at that prosperity. But there lies a growing problem. The Wall Street Journal reported that a little over 70% of this year’s bachelor’s degree recipients are leaving school with student loans, which is up from less than half of graduates in the Class of 1994. Every year, the situation gets worse and worse as the total student loan debt in the U.S reaches $1.2 trillion dollars, a debt worse than that of credit cards and auto loans (Touryalai). In order to combat this growing trend, we must take action to nip it at the bud. A 3 step solution of decreasing funding and investigating the legitimacy of for-profit schools, educating students thoroughly before they take on loans, and enacting overall student loan reform would help curb the rise of more debt in this area, and hopefully after it’s implementation, work to reverse this deficit.

A crisis as large as this one cannot be solved easily at once. The first step would be to slowly lower funding for for-profit schools across the nation, and investigate their business malpractices. Educational institutes like DeVry University, ITT Technical Institute, University of Phoenix, and Everest University account “for about 25% of all student loans”, despite the fact they are only “13% of the higher education population”, and “account for half of all student loan defaults” (U.S Department of Education). The education that these students are paying for is neither cheap nor of high quality. These for-profit universities are often “5-6 times more expensive than community college” and “twice a 4 year state college or university” (PBS). However, the money earned from acquiring new students doesn’t go back to bettering student education. Mark Defusco, a director at the University of Phoenix once admitted in an interview that, while paying for faculty accounts for 10-15% of the total revenue of the company, 20-25% go toward further marketing (Frontline). More money is spent to acquire more students and revenue than to provide the service of educating. In December of 2013, out of 115 students who enrolled in a program at ITT Technical Institute, only 27 actually graduated and 13 of those graduates are actually employed (ITT Tech Job Report). For-profit schools work as a business rather than an educational institute, never working to ensure their students’ academic success. However, these colleges still continue to get funding from the government, only adding to the debt. Any other business that does not provide the quality services it promises would face consequences— and these for-profit colleges should be treated in the same way. Reallocating their funding would help alleviate some of the debt problem as the money would go toward more deserving students and institutes. On top of that, it is equally important to investigate the branches of these non-profits that do not provide education at the caliber that students deserve. Limiting the loans we provide to students who attend these poor-preforming schools and limiting aid to the for-profit college itself could, in turn, decrease the amount of for-profit schools that exist at all and lighten the financial burden.

Another step to the greater solution is clearly and effectively educating students on the loans they are taking out before they take them. The information available for students to understand the loans they are taking is extensive and confusing. Interest rates are not easily comprehensible and many students continue taking out loans because they don’t know how much is too much. A way to fix that would be to possibly create a course students could take that would educate them on the specifics of their loans—so they would be more aware of the loans they are taking out. It would be beneficial to create resources that can help students craft a plan to efficiently pay back their loans. Jordan Arnold, a 22 year old who graduated from college in 2013, managed to pay off his $23,150 of loans in exactly one year—claiming the key to his success was “[having] a game plan” (Brandeisky). He got a job right out of college and began paying his debts before interest started to build up, helping him take a step in the right direction early on. Other students should know tips like these that could help them pay back their loans as soon as possible. On top of that, universities should also play a bigger role in assisting students with staying on top of their debt. Universities should help students determine how to efficiently pay back their loans with their given career choices and work to provide a bridge between new employees and the job market, so students can get to work quickly after graduation. By making these resources available, students taking out loans may run into fewer problems because they’re more aware of their actions and have more guidance to keep them out of financial trouble, essentially cutting the problem at it’s source.

The final and most broad step would be student loan reform at the legislative level. Student loans are especially problematic in their many differences from other loans. While banks on Wall Street were bailed out in 2008 after reaching bankruptcy, student loans are not only non-dischargeable in bankruptcy, but also cannot be restructured or refinanced either (Cohn). More money needs to be reallocated to students and toward education, and the status of these loans needs to be more lenient. The government could work with private lenders when it came to debt refinancing, so private lenders could help bring the rates of these high repayments down and help borrowers from defaulting—or at the very least, alleviate some of the burden of the loan in the case of bankruptcy. It would give students a lot more flexibility when it comes to paying loans and help from having more students default on their loans. The government could also change their repayment programs from a less one-size-fits-all program to one that is income based. With a repayment program based on how much someone is earning, graduates with incomes that are less than usual will not have to pay at the same universal rates—making it easier to pay back loans and lowering the probability of them defaulting. These types of reforms need the government’s support and heavy involvement to become successful. Money needs to be moved from areas on inefficiency to be spend to fund the future. Funding all other sectors over education puts everything else at a higher priority than education, and will only result in major decrease of productivity and advancement in our society.

Many who oppose widespread big government may see this plan as government overreach, and they do have a point. Money will be heavily reallocated and the government will be very involved on a business level. This plan entails that many for-profit schools be defunded, and proprietors of these education institutes will definitely be against that happening. However, with a student debt crisis that is second only to nation’s mortgage debt crisis, it’s something that has to be done. Students invest in an education because it’s a prerequisite in today’s society for a good job, but they should not be spending the rest of their lives at that job trying to pay back the investment that got them there. There needs to be a better way to invest in the future so that the majority of graduates are not indebted for the rest of their lives and the economy is not further hindered by more debt. But not only is this a problem for students, but it is also a problem for our whole economy. Economist Paul Krugman once said in an interview that, “the single biggest factors keeping us in this depression is the overhang of [household] debt… and student loans are a very big part of that debt.” Because of student loans, graduates fresh out of college are having difficulties buying cars and homes—a setback that hinders our other major economic markets. By cutting inefficiencies where we see them in our education system, we will benefit many of the other sectors and can propel our society in the direction of economic success.

The student loan debt crisis is a crisis that needs to be solved soon. The Wall Street Journal named the graduating class of 2014 the “most indebted class ever”, taking the crown from the year just before them. By cutting funding for for-profit universities and investigating their merits, educating students on their loans prior to accepting them, and enacting student loan reform, the government can help cut down on the millions of graduates who must default from paying back their student loans and the billions who cannot live their lives to the fullest because of the debt they’re burdened with.

Work Cited

Brandeisky, Kara. “This Millennial Paid Off $23,375 in Student Loans in Just 10 Months.” Time. Time, n.d. Web. 11 Feb. 2015.
Cohn, Scott. “The Debt That Won’t Go Away.” CNBC. CNBC, 20 Dec. 2010. Web. 11 Feb. 2015.
FRONTLINE. “Interview: Mark DeFusco.” PBS, 2010. Web. 11 Feb. 2015.
“ITT Technical Institute Job Report.” ITT Technical Institute. ITT Technical Institute, Dec. 2011. Web. 11 Feb. 2015.
Krugman, Paul. “The State Of Student Loans: More Debt, More Defaults, More Problems.” PBS. PBS, n.d. Web. 11 Feb. 2015.
“Obama Administration Takes Action to Protect Americans from Predatory, Poor-Performing Career Colleges.” Obama Administration Takes Action to Protect Americans from Predatory, Poor-Performing Career Colleges. U.S. Department of Education, n.d. Web. 11 Feb. 2015.
Touryalai, Halah. “$1 Trillion Student Loan Problem Keeps Getting Worse.” Forbes. Forbes Magazine, n.d. Web. 11 Feb. 2015.
“Watch Now: PBS NewsHour | Student Loans: More Debt, More Defaults, More Problems | PBS Video.” Student Loans: More Debt, More Defaults, More Problems. PBS, 2012. Web. 11 Feb. 2015.

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