A recent report by the Department of Education has debunked popular beliefs about student loans. First, the opinion that students pay off the debt in under ten years is untrue, with the average student taking much longer. In fact, only half of the students pay off the debt in 20 years. Furthermore, the belief that default commonly occurs within the first few years of graduation due to the inability to pay is incorrect. On average, the first default occurs at 4.9 years after entering the repayment period. Finally, the amount borrowed does not always correlate to default statistics, but rather the rate of drop out does for those unable to complete a bachelor’s degree (Lindsay, 2018). Effectively, this shows that student debt is crippling for people far after graduation into adulthood, when other expenses such as family, home, and vehicle purchases may incur. This suggests that the loan debt crisis can have significant social and economic ramifications if not addressed.
The 1.4 trillion debt crisis is an immense issue that requires cooperation amongst all relevant stakeholders. It is evident that reform is required for both colleges and government policies regarding oversight for the loans. Universities are often criticized for using dishonest practices and promises to lure those who cannot afford it to take upon these loans. One possible solution to the debt crisis is to introduce a tuition-free education program in exchange for public service. Many countries in Europe and military schools operate in this manner. It benefits both parties and reduces the crippling impact of debt (Ferencik, 2018). Another radical solution proposed by various experts is for the government, as the main creditor of student loans, to cancel all accrued debt. It is a radical solution, but so is the crisis at hand. In turn, this would have significant macroeconomic impacts from lowered unemployment to increased spending which would boost the economy (Steinbaum, 2018).
References
Ferencik, J. (2018). The student debt crisis — Is there a solution? Web.
Lindsay, T. (2018). New report: The U.S. student-loan debt crisis is even worse than we thought.Forbes. Web.
Steinbaum, M. (2018).A radical solution to the student debt crisis. Web.