The U.S. Student Loan Crisis


For generations, many Americans have viewed a college education as an essential step toward achieving success. A degree provides higher education and the credentials necessary to be considered for gainful employment. However, achieving a college degree has always come with its challenges. Besides requiring an academic record high enough to be considered for acceptance, higher education has historically come with a price tag proven to be cost prohibitive for some. Undeterred, many potential college students have turned to student loans to cover the cost of tuition, books, room and board, and other expenses related to earning their degree. Over time, new government programs and subsidies made these loans available to more and more students- however the cost of tuition has risen far faster than inflation.

An article by Forbes reports that the price of college is increasing almost eight times faster than wages. And between 1989 and 2016, the cost of a four-year degree doubled, even after inflation is calculated. It’s no surprise that so many students are turning toward loans to finance their higher educations. In fact, student loans make up the largest chunk of U.S. non-housing debt, currently accounting for $1.4T of U.S. household debt.

According to Nasdaq.com, 11 percent of the 44 million estimated student loan borrowers are 90 days or more delinquent. And with 70 percent of borrowers’ total debt averaging $30,000, and nearly 20 percent owing more than $100,000, the danger of failing to repay this debt to the U.S. economy is palpable.

When it comes to the exact effect on the U.S. economy, there are differing schools of thought. Much like the housing crisis of 2008, some consider the “pop” of the student loan debt bubble and an immediate pervasive detrimental effect to be imminent. While others see the “bubble” as more of an albatross to be carried over the coming years. After all, unlike the housing crisis, the backing on student loan debt is the future earnings of that student. There can be no devaluation of the collateral. However, prolonged repayment of loans could potentially put a drag on other areas, such as homebuying, consumer goods, etc., until lendees can get their debt under control.

While the current conditions of U.S. student loans is certainly in crisis, it might be more of a slow dragging effect rather than a sudden burst. Either way, it emphasizes the importance of repayment of these loans in the most efficient way possible.