Student loans have been in the spotlight more than ever recently as the Occupy Wall Street movement sheds light on severity of student debt and the trouble most post graduates experience paying it back. Many college graduates who took out loans 10 or 20 years ago and entered the job market at its peak, have complained of the weight of student loans and the long-term role they play in their life.
For the new generation, this impact will be significantly more dramatic. As of this moment, outstanding student loans are nearing a towering $1 trillion, exceeding even the amount being spent on credit cards. President Obama has stressed the importance of recognizing the exorbitant costs of a college education against the amount most people can expect to make with their degrees.
An English literature major that graduates from an expensive private university for instance may be hard pressed to find the extra income to begin with on the increasingly narrow paychecks being offered. The problem is getting worse though, not better. Just last year the cost of attending college rose by 5.4 percent, far exceeding the level of inflation. Even with these massive 40 and 50 K annual tuitions, people are still lining up at well manicured doors. Students are told that a college degree is worth as much as a million dollars in wages over the course of their lifetime, an appeal that to many, is too attractive to ignore.
For that reason students continue to take on debt of an average of 25,000 with droves owing even more than that. The result it not just bad for the students, who spend their twenties stressing over, floundering, and often failing to repay such debts but also for the economy. Rather than purchasing big ticket items typical of their age range from homes to automobiles, debt laden graduates are devoting all their additional income to paying for their college education.
The debts do more than just prevent consumer discretionary purchases though. Those students able to land jobs after graduation would naturally be more reluctant to leave their position to pursue self-employment. This in turn, minimizes the amount of new businesses and weighs on the prospects for a job recovery. Fewer jobs in the future only heighten the impact of the earlier to consequences. The government has dedicated massive funding to grants and public universities in an attempt to lessen the damage incurred by loans on the economy, but rising tuition costs continue to absorb any cash the government can afford to award.
To put it in the words of Patrick M. Callan of the Higher Education Policy Institute in a recent New York Times piece, “We have a less affordable system that we had a decade ago. We’re on a national treadmill.”
With the treadmill factor fully realized, many Americans are wondering what can be done to hop off and leave it behind. The Occupy Wall Street movement, for its part, is suggesting a large scale boycott of debt payments. The group is looking to gather 1 million people willing to risk a pricey default on their loans in an effort to spur reform. The government, for its part, does not seem willing to engage a public looking for a return to publicly funded education or simply more manageable interest rates. Rather the federal attitude seems to be advocating that fewer people seek out higher education in areas of study that will not lead to considerable returns on the investment. This tug of war could continue to become more heated in the coming years as the full weight of the debt on the economy reveals itself, but for those keeping score, perhaps the number of French literature majors enrolling each year can be an agreed upon metric for measuring who is in the lead.
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