In Atlanta, Jennifer Char attended Westwood College, intending to become a graphic artist. Today’s world is not what she expected. She sells cosmetics in a retail setting and reflects on her two years at the institution. She graduated from a school that shut its doors for good last year. She wonders about the worth of that degree now that her debt is growing. She is among the millions of young adults whose US student loan debt in 2022 will reach record levels.
She explains that she withdrew from the class but didn’t have enough examples in her portfolio of work to present to employers because she felt that some of the classes were more like elective courses for high school or useless for her degree. It didn’t provide much solace. Why am I spending money on something that won’t be worthwhile?
US Student Loan Debt Affects Ability to Find a Home, Buy A Car
Ms. Char still carries debt from her time as a Westwood University student. She claims that $400–$500 in monthly loan installments take up around half of her take-home money. Although she has the benefit of a forgiving landlord in the form of her mother, her struggles with student loan debt are by no means exceptional.
Americans had collectively built up $1.75 trillion of student debt in 2022, more than three times what it was twenty years ago. With the belief that continuing their education after high school would be the best path to escape the cycle of low salaries that has kept millions behind even during the economic recovery after 2010, many young adults have taken on significant debt.
1 in 10 Holders of Student Debt Are Not Making Payments
Some people are now discovering that the costs outweigh the advantages. In terms of consumer credit, student loans had the greatest default rates in 2012, surpassing credit cards. At the time of the COVID-19 outbreak, more than 11% of all outstanding student loans were more than 90 days past due. In 2020, student loan defaults were stopped due to crisis alleviation efforts. Concerningly, research indicates that students who can least afford it—poorer Americans who took out smaller loans to pay for classes at less esteemed institutions—face the most significant financial difficulties.
In most situations, federal regulations prevent student debt from being erased through bankruptcy, which means the obligations can have a long-term negative impact on a person’s finances. This has led to worries about the amount of student debt, which in 2014 increased to an average of just under $29,000 per borrower from $18,550. Many Americans’ ability to establish a business or purchase a home is impacted by this.
Could Student Loan Debt Cause Another Recession?
According to the Consumer Financial Protection Bureau, the Student Debt Situation Bears Hall Meltdown was established following the financial crisis as the chief regulator of school loans. “We see a breakdown in student loan repayment disturbingly evocative of what we witnessed in the mortgage crisis,” says Seth Frotman, acting student loan ombudsman at the Consumer Financial Protection Bureau.
He claims that unlike other types of consumer debt, student loans are not subject to extensive regulations on matters like addressing complaints, processing payments, and how to assist troubled borrowers. A generation of young adults is now burdened with unheard-of levels of student debt. We observe this having an effect on household spending and budgeting, which has broader economic ramifications.
Student loan debts impact and drags down the credit scores of millions of young adults. This future drags down the economy as their ability to buy a home or car is diminished.
Two Prior Presidents Failed to Act On Student Debt
The administration of President Barack Obama had taken steps to lessen the burden of personal loans for borrowers with bad credit, including increasing grants for those less fortunate, expanding programs that adjust repayments according to the size of graduates’ salaries, and creating a tax credit for educational costs.
It also wants to take action against universities it claims are making illicit financial gains from students. This includes universities that are accused of operating recruitment mills to enroll as many students as possible, regardless of their aptitude or likelihood of success.
The Trump administration suggested taking legal action against people who have student loan debt. The Trump administration suggested doing away with the student loan interest deduction, which was first included in the Tax Cuts and Jobs Act. With the student loan interest deduction, borrowers can write off up to $2,500 of interest paid on student loans from their taxable income.
Political Solutions Elusive For Curing Student Debt
Hillary Clinton, Bernie Sanders, and Marco Rubio, all of whom ran for president in 2016, laid out specific ideas to overhaul student loan borrowing as a centerpiece of their platforms. According to a January USA Today/Rock the Vote poll, President Joe Biden’s most significant challenges for voters born after 1980 are the economy and jobs, followed by student debt and the cost of higher education. But it’s still unclear whether the student loan crisis will be resolved in whole or in part before the 2024 presidential election.
Final Thoughts on US Student Loan Debt
Millions of young Americans seek the elimination of student loan debt. Unfortunately, it’s doubtful that all debt will be forgiven. However, loan modifications may be a plan lawmakers seek to implement to take some of the sting out of a considerable drag on our economy. It remains to be seen if Congress and the President