Student Loan Debt in the US and Possible Solutions

Abstract

The purpose of this paper is to bring attention to the problem of student loan debt, and the need to determine a solution to it. The amount of debt owed by borrowers for education has been growing rapidly, and action must be taken to prevent this trend from continuing. We look at the reasons why this debt is generated, leading to a solution that the easiest remedy is to better educate potential students on trade school. Entering the trades is a very good opportunity versus college, requiring less tuition costs and helping to lower student loan debt.

Student loan debt is at a crisis level today, with no signs of changing without drastic intervention. With over 44 million borrowers today (Chiwaya, N., 2019), we either have our own loans, or a family member, spouse, child, or friend of ours owns a debt for education. Many people today feel they do not have any other options but to attend college and get a degree, no matter what the costs are. They are led to believe that without a degree they will not be able to obtain a well-paying career. Thus, the cycle continues of students taking out loans to pay for their education, under the premise that they will immediately be granted a highly paid career after graduation, without a second thought of the possibility that they will not be able to afford to pay these loans back. The problem of acquiring large debts before entering the workforce will continue until we better educate potential students on the alternative opportunities available to them.

In 2019, the total amount of student loan debt from all borrowers has reached $1.5 trillion in the United States alone, and has become the second highest consumer debt, behind only mortgage debts (Friedman, Z., 2019). This figure, although not shared equally, averages to around $34,000 per borrower. The educational institutions and their rising tuitions have directly contributed to this problem reaching this level today. Tuition and fees rose around three times the rate of inflation from 2007 to 2018 (Gibson, K., 2019), causing the prospective student to have to borrow larger amounts to receive the same level of education.

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Students pursue degrees, and accept the debts associated with them, in the hopes of obtaining higher paying jobs. It seems like an easy decision when a college degree accounts for $15,000 in additional income per year when compared to those who have only a high school education (Hamm, T., 2019). With this knowledge, it appears that your education would pay for itself with the extra income, until you account for the cost of obtaining your degree. “Research conducted by the Idaho Department of Labor found that the average bachelor’s degree in the United States costs $127,000!” (Hamm, T., 2019). When you consider that the student loans are borrowed with interest, the true cost of this education grows based on the amount borrowed.

Unless we disrupt this cycle of blindly borrowing these massive loans, this overall debt will continue to skyrocket. Currently with 5.1 million borrowers over 360 days delinquent on their loans, and another 2.6 million borrowers in forbearance (Friedman, Z., 2019), these numbers will also continue to rise. With as high as 40% of the attendees dropping out of college before they receive their degree, many of these borrowers have acquired debt with nothing in return. This is something we cannot allow.

There are many options we could pursue as a resolution that could divert the future student down a path will not lead them to overwhelming debt. Our economy is adding jobs daily in the trades and needs individuals who are willing to fill those positions. Our government could put caps on borrowing for students, not allowing them to almost borrow unlimited amounts of money at will. This would require legislative action, that could take years or longer to accomplish. Another option, that would likely be met with opposition, would be to make the universities co-sign for the students’ loans so they share some of the risk and not just the reward. These universities should share the investment in their students, and ensure they succeed to repay the loans.

I believe our best, quickest solution is the need to encourage more of our youth and potential students to pursue trade school over a traditional four-year college. With education in a trade, you will not only have a comparable income over your career, but you are not required to enter the workforce with huge debts first. A trade school degree averages $33,000 (Hamm, T., 2019), which is substantially less than the average bachelor’s degree. Currently, such as the case of where I am personally employed, many of the skilled workers in these trades are an older generation, leaving many opportunities for younger employees. As reported by Agence France Presse (2019), “Nearly 80 percent of firms said they were having difficulty finding high-skilled workers, while half face shortages of mid-skill workers. In the manufacturing sector, 60 percent of firms have raised wages while half have lowered requirements for new hires.” There is not only a need, but also more incentives in pay to enter the trades for a career, and we owe it to our future to encourage entry into this field.

An objection to this solution might be that the you will earn more in your lifetime with a college degree. While statistically, this is true, it does not consider any extra years needed to complete the degree. Lost wages during the added time in college over trade school, and any additional years necessary, take away from your earnings. Also, there are many fields that simply do not have enough positions for the graduates to fill, causing many graduates to be unemployed and underemployed. Skilled workers are in such high demand, they are likely not to suffer from the same gaps in employment combined with lack of return on their education investment. Many graduates I personally know are not employed in their fields of study or are not using their degree at all.

We must act in this crisis to bring these debts down. There are many other ways to be successful today than by going to college and getting a degree. College is not one size fits all, and we must stop treating it as such because that is how this massive debt was created. A career in trades can be equally or more rewarding than a college degree. It is our responsibility as siblings, parents, and mentors to either educate or encourage students to seek knowledge about their options to allow them a better financial future. Promoting trades will draw more interest in them and will quickly help lower student loan debts.

References

• Chiwaya, N. (2019). These five charts show how bad the student loan debt situation is. NBC News. Retrieved from https://www.nbcnews.com
• Friedman, Z. (2019). Student loan debt statistics in 2019: a $1.5 trillion crisis. Forbes. Retrieved              from https://www.forbes.com
• Hamm, T. (2019). Why you should consider trade school instead of college. The Simple Dollar. Retrieved from https://www.thesimpledollar.com
• US firms trim growth forecasts amid tariffs, worker shortage: survey. (2019, April). AFP. Retrieved from https://www.news.yahoo.com