INSTITUTIONAL INVESTOR: Investors and Advisers Grapple with Challenges of Student Debt

Career College Central Summary:

  • In his State of the Union address on January 20, President Barack Obama announced more details of his plan to make two-year community college free for all qualified students. Under the proposal, the federal government would cover 75 percent of the cost of community college with an additional 25 percent borne by the states. If all 50 states participated, the total number of students benefiting could exceed 9 million annually.
  • From a big-picture standpoint, the advantages of universal college education are clear. Economists agree that increasing the average education level of a nation’s labor force leads to higher productivity. At the household level, the effect of higher education is even more pronounced. U.S. Department of Labor data clearly indicate that in an increasingly competitive job market, a college degree is necessary to enter the middle class.
  • With college increasingly critical to social mobility, the big question facing U.S. households is how to finance the pursuit of a degree. For many students, the only solution has been to take out education loans. This has had a dramatic impact on the economy. The latest data from the Federal Reserve place total U.S. consumer credit at $3.3 trillion. At least $1.2 trillion of that is estimated to be student debt, with roughly $1 trillion guaranteed by federal agencies.

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