Student loans are a form of financial aid used to help students access higher education. Student loan debt in the US has been growing rapidly since 2006, rising to nearly $1.56 trillion in 2019, roughly 7.5 percent of GDP. Not only so, but an average student loan borrower graduates with $30,000 in debt. More than two-in-five (42 percent) Millennials between 18 and 29 years old report that they or someone in their household has student loan debt. Even graduates are so burdened with debt, according to reports, that they are choosing not to buy homes or get married. Even grandparents are burdened by student loans, having borrowed on their grandkids’ behalf.
The federal student loan program is criticized for not adjusting interest rates according to the riskiness of factors that are under students’ control, such as choice of academic major. Some critics of financial aid claim that, because schools are assured of receiving their fees no matter what happens to their students, they have felt free to raise their tuitions to very high levels. Not only so, but to accept students of inadequate academic ability and to produce too many graduates in some fields of study. Furthermore, a student loan has its benefits of relatively low costs, easier approval, and benefits at payback time. However, unlike the other credit cards or loans, the borrower isn’t able to claim bankruptcy. Lastly, As the government oversight of collection agencies is weak, there is little public information, and collectors can be abusive of this system for their benefits.
According to Marketwatch, a new report from Student Debt Crisis, a nonprofit organization, and Summer included a survey which showed that on the individual level, piling debt also imposes psychological impacts on college students. “It’s frustrating and honestly makes me feel completely defeated,” confessed Colleen, one of the respondents of the survey, from Pennsylvania. As one of the people quoted in the report, she talked about their struggles after incurring debt to get a good education. Furthermore, student loans were a “major source of stress” for 86 percent of the respondents, and 30 percent said student debt was the number one cause of their stress.
A lack of information and support of high school students from the state and local governments about future college costs can magnify the student loan crisis. As the government, many say that it is their responsibility to provide financial literacy and other support to help educate students and their families about student loans. With a variety of policies that failed previously, the public demands the local governments to find ways to fund education for students and their families.
To address this growing public discourse, many presidential candidates for the 2020 election are finding ways to help students with their loans. Elizabeth Warren’s proposal would cancel approximately $640 billion of student debt for approximately 42 million people in total. Warren believes that her plan would reduce the wealth gap in America and provide an economic stimulus to the middle class to increase home purchases and help start small businesses. Democratic candidate Bernie Sanders also unveiled a plan to cancel all student loan debt in America, partnering with the Republicans. Both of their proposals are to eliminate all student loan debt in ten years. Including some variations within, their main proposal includes paying off the loans from taxes and tariffs, as a ‘more fair tax plan.’
Student loans now have lifelong effects, aside from their impact on day-to-day living. These effects can be seen through a person’s life, even in retirement. The lasting effects of student loans, such as its impact on retirement, marriage, health, finance, homeownership, and more have raised the issue of the student-debt crisis as a huge and pressing issue. It is crucial for students to be aware and prepared for the effects their loans will have on their lives.