College is an immense opportunity.
It’s time to move out of the family home and step into further education. College is a formative experience. The knowledge, connections, and friendships acquired in those few years often last a lifetime.
But it’s not cheap. After all, scholarships, bursaries, and financial aid aren’t available to everyone.
Instead, the majority of people are forced to take out a student loan. Last year’s graduates left college with an average debt of almost $30,000 each. Of course, this financial burden can be a major challenge at an individual level.
Entering the ‘real-world’ in thousands of dollars of debt is hardly an easy start. Most people take years to pay off their student loan.
However, the problems don’t stop there. The burden of debt is felt at much higher levels too. Indeed, the combined student loan debt represents a major economic problem in the US. Many are labeling it a modern-day crisis.
Interested in finding out more about the current state of student loan affairs?
Keep reading to discover 9 shocking facts about the student loan crisis in America.
1. Student Loan Debt Totals $1.5 Trillion
That’s right: trillion.
According to the same source we linked to in the intro, Americans owe more than 1.5 trillion dollars in student loan debts. That’s a lot of commas and zeros.
Debt in the US is a problem in other areas too. For instance, total credit card debt comes in at around $975 billion. That’s obviously a hefty sum as well. But it represents only two-thirds of the student loan debt problem.
Clearly, Americans are drowning in student loan repayments. The situation is only getting worse. With no changes on the horizon, and more people going to college every year, the debt will only increase.
2. Students Owe Increasing Sums Every Year
Clearly, the degree of student loan debt is scarily high.
Presumably, the entire situation will collapse and the economy will take the hit. Everyone will suffer.
You’d think someone would do something about it. Obvious problems demand swift and effective solutions to be found. Unfortunately, the opposite seems to be happening.
Far from student debt going down, it’s going up each and every year. Looking back through time paints a picture. The upward trend becomes clear.
For instance, in 2005 the average debt per student hovered at just over $17,000. By 2012 (according to the same source) that sum had shot up to over $27,000! That’s a 10 grand increase in 7 years.
Now, of course, we’re at almost $30,000. Sure, the rate of increase has slowed, which is good. But it’s still going up. Who knows how much debt someone can expect to leave college within the years to come?
3. The Debt Has Doubled In a Decade
It’s worth emphasizing this point: The year-over-year rise in student debt is staggering.
10 years ago, the average sum of money owed by people post-graduation was nearly half what it is today. Again, it’s only set to get worse.
Economic pressures are increasing. The current narrative holds that a college education is paramount in getting ahead in life. From career progression to earning potential. It’s widely believed that paying for college tuition (and taking on the associated debt) is a necessary evil.
At the same time, states around the country are reducing their further education financial support. Furthermore, that’s happening just as colleges continue to increase their fees.
Costs are higher. Support is lower. Incomes remain fairly constant. That’s a sure-fire recipe for increasing debt.
4. It Wasn’t Always This Way
Tuition fees haven’t always landed graduates in insane levels of debt.
In fact, the current situation only really began back in the 1970s when the economy was struggling. Prior to that, tuition was affordable for almost everyone.
That’s an understatement. Go back 100 years or so and many colleges charged literally nothing! You might have paid a couple of hundred bucks for some of the top institutions. But many would get away with free education.
Sure, not everything was great back then. The quality of life we enjoy now is far superior. And, you know, the global political situation of the early 20th Century was far from ideal, to say the least.
However, they almost certainly didn’t have students struggling under the weight of student debt.
5. Not All States Charge Equally
Different parts of the country owe more than others.
Of course, larger states (in terms of population) will naturally represent higher proportions of the student debt. There are more people owing money! That means states like California and Texas owe particularly high sums overall.
However, it’s also true that certain states have higher fees than others.
Connecticut is the most guilty. The average debt from 2017’s graduating class came in at a massive $38,510. By comparison, the same source details how Utah boasts a paltry $18.838 average. Clearly, where you decide to study makes a significant difference in debt you end up with.
Aspiring students with money on the mind might consider this when deciding their college.
6. People Can’t Afford Repayments
As we’ve already noted, it’s widely believed that college education is necessary to get ahead.
That may well be the case overall. A degree can definitely make it easier to get a job.
However, it doesn’t guarantee a sufficiently high salary in the short term after graduating. Indeed, rates of delinquency on student loans are at an all-time high. At Q3 of last year, 11.5% of the aggregated debt of this nature was 90 or more day’s delinquent or in default.
That’s a significant amount of people defaulting on loan repayments. It’s unsurprising. Starting salaries are usually inadequate for covering all expenses.
With rent, food, and accommodation to cover, student loans often take a backseat. Dreams of getting starting on repayments straight after graduation fall by the wayside.
A degree may help graduates get a first foot on the career ladder. But they don’t necessarily guarantee a wage to help pay for it.
Unfortunately, student loan delinquency doesn’t go unnoticed! Lenders are within their legal rights to garnish wages to start the repayment process. As a quick aside, for legal advice, McCarthy Law PLC can help.
That’s more bad news for graduated already struggling to cope with low pay.
7. Credit Ratings Suffer
What happens when anyone falls behind on loan repayments?
Their credit ratings take a hit.
The same is true when people start to default on their student loans. This can add insult to injury for fresh graduates. Firstly, the financial cost of college results in tens of thousands of dollars of debt.
Next, the jobs they work hard to get (and possibly got a degree for in the first place) pay less than what’s required to cover all expenses. Then, the ensuing struggle to repay the loan damages credit scores.
From there, the ability to buy homes, get additional loans, and so on becomes harder. For young people trying to work their way upwards in life, this can be a huge negative.
8. Employers May Offer Support
Let’s face it, this is all fairly depressing so far!
Thankfully, it isn’t all bad news for graduates.
A silver lining can often be found in the incentives offered by popular employers. They know and understand the burden of debt. As such, some companies try to entice top grads by offering to help with loan repayments.
However, even this has can pack a slight sucker punch. Some employers do indeed pay for a certain amount of the loan. But the money they contribute actually counts as taxable income. This can have a deleterious impact on your finances when the time comes to file tax returns.
9. Tax Can Be Deducted
Here’s another tax-related slice of good news:
The interest you pay on a student loan may well be tax-deductible.
Your salary must fall below certain brackets. However, if you’re eligible, then it’s possible to claim for the interest repayments you’ve made.
This can be a significant tax break for some people. The amount of taxable income can but cut by thousands of dollars in some cases. It might seem like a minor victory. But every little bit helps. Over time, those tax gains can all go back into repaying the loan.
Final Thoughts on the Student Loan Crisis
There you have it: shocking facts about the student loan crisis in the United States.
College represents an incredible opportunity for young people around the country. It’s a rite of passage. It’s a step into adulthood and independence. Further education holds immense value in all manner of ways.
However, as we’ve seen, it usually comes at a significant financial cost. Students come out of college with thousands of dollars of debt. The combined debt burden is a crisis in the country. Unfortunately, the situation only seems to be getting worse with time.
Hopefully, this article has highlighted some of the key things to know about the predicament.
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