Government Loans Are Causing A Debt Crisis In Higher Ed

Career College Central summary:

  • If some government loan programs have been successful, most have caused more problems than they have solved. Recent history shows the problem is worsening.
  • Consider this: The annual cost of college for tuition, room, board and fees is rapidly rising. There are several reasons for this, but the main culprit is the government student loan program. In an effort to make sure that no student is denied college because of the inability to pay, the federal government has created loan programs that will cover the entire cost of college, no matter how high that cost is. Colleges are thus encouraged to raise tuition and fees at a rate that greatly exceeds inflation.
  • According to the Consumer Financial Protection Bureau, total student debt now exceeds $1 trillion. The average student graduates with about $27,000 in debt, with 10 percent of graduates having debt that exceeds $40,000. This means that students will pay an average of $320 per month for the first ten years after graduation. This places yet another burden on new graduates who are having a hard time finding a good job because of the continuing poor performance of the economy.
  • Student debt could be the next big financial crisis. When the mortgage crisis hit, the result was that housing prices were adjusted downward significantly with some markets seeing as much as a 50 percent decrease in price. If the student debt issue does cause a crisis, it is nearly impossible for colleges to adjust their prices downward, so what happens is really anybodies guess. What isn’t a guess is that taxpayers will eventually have to foot the bill.

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