For many college students in America, taking out loans is a crucial way to help pay for education. If student loans never existed, enrollment rates around the nation’s universities would undoubtedly plummet. However, while federal and private loans are helpful in helping students pay for college, they carry a significant downside as well.
In 2010, the amount of student debt exceeded the amount of credit card debt. In 2011, student debt exceeded $1 trillion, and that number is not showing any signs of coming down anytime soon. According to a study from the Project of Student Debt, two thirds of class of 2010 graduates averaged $25,250 in debt. The following year, Mark Kantrowitz of FinAid.com reported an average of $27,000 for graduates.
“I have a job that pays me a good salary, but I don’t get to see too much of it because it ends up going to my bills, especially my student loans,” Megan Kutulis, class of 2010 alumna, said. “Even if you do graduate and find a job that pays you a decent salary, it’s still not enough to keep up with the debt you’re paying.” Kutulis currently works full-time as the social media manager and content producer for Main Line Health.
Students and recent graduates are not the only ones affected by loans. As reported by SmartMoney.com last year, 2.2 million people aged 60 or older had to pay back student loans. These loans are from anything ranging from helping their children and grandchildren pay for school to funding their own education.
“As parents of these students take on the some of the financial burden of student loans, they won’t be able to retire as early as they might like, potentially leaving less jobs for younger generations,” Kutulis said.
President Barack Obama’s “pay-as-you-earn” plan can provide some relief for borrowers, calling for loan payments to be 10 percent of income with loan forgiveness after 20 years. However, after this loan forgiveness takes place, the borrower would have to pay a significant tax on the loan, which could cause further problems in the future.
“Students should repay their loans based off of their earnings after they graduate,” Kutulis said. “It might take longer to do it, but it’s a lot less overwhelming when you know that the money you’re paying is realistic.”
Student loans also have alternative impacts on the economy, particularly the housing market. Many graduates who go on to try and become first-time homeowners are rejected for a multitude of reasons, such as having too much to pay between the student loans and mortgage loans. The impact that the housing market has on our economy is incredible, and hampering recent graduates’ ability to buy a house slows down recovery from the Great Recession.
There are steps out there for students to take so that debt is not too big of an issue after graduation. Whether or not it’s working a side job like many students do, saving money or trying to make monthly payments in school, students are not completely out of luck.
“Make sure you get the lowest possible interest rate on your loans and apply for any type of financial aid out there,” alumnus Andrew Matysik said. “Also, once you graduate, work hard.”
If the existing $1 trillion in debt continues its trend of increasing, it could drastically change and alter the landscape of how students go to college. There is the possibility of students not going to college altogether, or only going for several years. Going into trade schools after high school is a significant option as well.
“You see so many people who go on to learn a trade or open their own business with a two-year degree,” Kutulis said. “I think more and more people will be turned off by the thought of a four-year degree from a larger institution.”
While student debt is a nationwide issue that could alter the landscape of American education, students don’t have to be too intimidated by the issue. The college experience is a once-in-a-lifetime opportunity; might as well make the most of it. Student loans may have a negative downside and cost a lot in the long run, but the memories and education one receives are priceless.
“Make the most of college so that when you stare at those bills with those thousands of dollars, at least you can say you gained something from it,” Matysik said.”