Preparing for the future by Student loan consolidation expert Bruce Mesnekoff
Much has been touted about the student loan crisis and the repercussions being faced by the government, colleges and students. Student loan debt has being seeing an increase each year for the past few decades and today it stands at a whopping $ 1.2 trillion . Recent studies show that more than two thirds of graduates had loans at graduations and that the average debt was about $35,000, an amount which has almost tripled in the last two decades.
The situation is a cause for worry for everyone. Much of the burden of paying for college has shifted from state government to families, as the government grants have failed to keep up with the increasing costs of college education despite receiving income tax revenue from graduates. It is estimated that around 16.7% of college graduates are graduating with excessive debts.
What is making these students take loans? The reasons are many, but a few can be identified outright. A college degree is being seen as an important document in the competitive job market , at the same time there is not much appreciation in the American wages. Indicating that the students are following pipe dreams and going in for expensive education hoping that it will throw open the job markets for them, which is far moved from reality. More and more students are enrolling into for-profit colleges which project inflated job placements to lure students. It is not necessary that after the graduation repayments are easy. Students are facing hardships there too considering the global recession. It is difficult for students to find success in the job market and repay their loans, indicating the failure of higher education institutes in bailing out students. Defaulting student borrowers are fast increasing as many a times, the amount owed is more than what they borrowed as they are accumulating interest faster than they are repaying loans. Definitely all these studies and figures are pointing towards a generation hurtling towards a student loan crisis and getting crushed under it.
Apart from effect on states and governments such huge figures are taking their toll on the students life too and restraining them from getting ahead on a personal front. A sizeable amount of students who graduated with excessive debts put off major decisions like buying a home, going the family way or even buying a car for a later day. The repayment plays on the student's mind all through the years he is indebted keeping him away from small things he enjoys, negatively impacting the quality of life. This also capsizes their ability to save for future needs and retirement too. The debt also influences the job related decisions, students compromise by picking up jobs in fields other than their area of study or work overtime or settle for jobs with low remuneration as compared to their qualification.
Paying off such large loans are challenging under normal circumstances but with the non-appreciation of wages it is next to impossible. Making the interest payment alone is a big struggle leaving the repayment of loan aside. Handling the high rents, low wages and loan repayment leaves little or no scope for savings or mortgage.
Reducing the student debt is the top priority today so that these students are at least lifted to middle class. Institutes offering higher studies need to be more innovative by bringing down tuition fees, promoting flexible access and fixing up system structural problems. According to experts the colleges are spending far too much on infrastructure, student unions and unnecessary student entertainment structures like stadiums or rock climbing walls, all of which they need to curtail. The need of the hour calls for more targeted short term programs and apprenticeship models thereby developing skills with greater market value. Reduction of additional expenses for students by pushing for more open- source and online text books could help too.
Improvised student loan counseling and increased national awareness of college spending will perhaps be the first steps towards exercising restraints. Giving loans according to competencies previously attained will have a two pronged effect, it will provide the skills for advancement in career and that too in an affordable manner. Colleges must at their end limit student borrowing according to their enrollment status and academic major.
Though policy makers are suggesting reliefs like interest rate reduction and loan refinancing but it may be a while till such measures are implemented and secondly these are only short term reliefs.
Whatever the measures suggested there are facts that cannot be turned away from and that is the vulnerable and young generation is getting crushed under the student loan crisis. And the bottom line is that the higher education system is failing miserably and is incapable of preparing students for life after graduation. If cultivated properly the institutes can play a predominant role in helping students avoid financial hardship and have a greater stake in their success.