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Why Their Student Loans Are Our Problem

Updated on March 27, 2018
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Politics and policy are every citizen's duty. That is the price of democracy. Take a deep breath, focus and you can make a difference

Indentured Student embraced by the Grim Reaper of Debt
Indentured Student embraced by the Grim Reaper of Debt | Source

Do you have student loans?

With the cost of higher education soaring out of control, more students are turning to student loans than ever before. But how is that affecting America as a whole? And what can we do about it?

I recently saw a picture of a young person on the Internets. She was at one of those Occupy demonstrations. We've seen all those pictures before but this one was different. She had a sign that said, "I WON'T PAY MY STUDENT LOANS!"

Had I seen this sign in the 1990s or even the 2000s, I would have busted out laughing. I'd tap the guy next to me and show him the sign. Then he'd laugh out loud as well. Then during lunch or dinner I'd tell my friends about this sign and they'd laugh out loud. We all would have laughed.

That was then. This is now. Student loans are in everyone's face and there's no denying it.

I won't pay my student loans? What does that even mean?

Before we go any further, I'd like to make it clear that this isn't one of those Occupy whatever articles. This article is about the student loan crisis and its impact on all Americans.

Now let's take a closer look at that earlier statement: I won't pay my student loans! It may have been a joke a generation ago but it's quite bold to see it today. What does it even mean? It can mean several things. The protester...

  1. is angry. She sees economic injustice and refuses to pay even if she had the money.
  2. is poor. She cannot pay because the money just isn't there.
  3. is lost. She has given up. There is no light at the end of the tunnel.
  4. is protesting. It's all of the above.

The impact here is real. Her credit will be ruined. It will be far more difficult for her to get another loan. Future employers may even turn her away. If she ever does get a job, her wages will be garnished. She may even be taken to court over this. Her life is ruined and there is no escape. This is all because she wanted an education.

If what she states on her sign is true, it will be a real mess. But she's just one person. Sadly, she is not alone. Student default rates are soaring throughout America. In 2009, they reached a ten-year high. There are millions like her. Millions of young Americans with their lives ahead of them are ruined.

So what makes student loans different?

Source

What makes student loans different? I'm glad you asked! Let's make a quick list:

  1. Student loan balances are higher than ever. Massive debt is soaring with higher education costs. Student loans can easily exceed the amount the average American owes on credit cards, personal loans and even car loans. For those with graduate degrees, student loans can rival mortgages. There is little room to breathe as...
  2. Student loans can only be consolidated and refinanced once. While homeowners all over America can refinance their mortgages whenever interest rates tumble, college graduates cannot. It's only once. Then again, refinancing or consolidating may seem like foreign ideas because...
  3. Student loans focus on young Americans. Most students are fresh out of high school and have no income or credit history. To offer teenagers loans of any kind seems like an unusual investment. For this reason...
  4. Student loans, especially from private institutions, often require a cosigner. To help their children relatives step up to the plate and cosign a student loan. If the student loan goes bad, it can rip families apart and ruin the lives of honest, tax-paying, middle-class Americans. It doesn't matter to lenders because...
  5. Student loans cannot be discharged in bankruptcy. Actually, they can but it is nearly impossible to do so. This is the biggie. With student loans virtually guaranteed to make money, predatory lenders have nothing to lose. They can jack up interest rates if the graduate misses just one payment.

There is no other loan like this in America. For a lender, there is no other "investment" like it in the world. None. Students borrow money to pay for higher education and they pay until they are 60 or 70 years old. Social Security can easily be garnished. Lawyers, doctors and other highly trained professionals live in poverty. If they are unable to pay, they can lose the license in their field!

Yeah? So? How does it affect me?

With injustice, there is always "blow back". The Occupy movement is over with but it was only one symptom of this. People were sitting outside Wall Street because they had nowhere else to go! Those who were working at that time were grateful but underpaid and disappointed in their degrees.

Even if you don't have student loans, this crisis still affects you. It affects the entire economic landscape of America. With banks sucking so much money from generations of well-educated consumers willing to work, the rest of the economy rolls onto the backs of baby-boomers ready to retire.

College graduates can't afford to leave their parents' homes. This means the housing market suffers. They cannot start families so the next generation is stalled. They cannot afford durable goods which means the manufacturing sector takes a hit. They buy less consumables so the service sector takes a hit.

All this means your stocks will tumble every quarter. Or if your stocks are rising you can thank the endless war and government spending. Your savings account interest rates are nil. Your bonds barely keep up with inflation. All your assets collapse under you and you're surrounded by angry, hungry people.

What is education arbitrage? What can we do about it?

The video below makes a connection between the student loan bubble with students, higher education institutions, the government and employers. We are all to blame and we can all do something about it. If we want to save the future of our economy we have to start now.

TLDR? Here's a nice big picture for you

Banking on Education
Banking on Education | Source

What is Washington doing about it? What can I do about it?

Say what you will about President Obama but during his time in office he did his part to help our students and families tackle the problem. Just one example is the Health Care and Education Reconciliation Act which cuts out private student loan lenders saving taxpayers and students billions.

Congress continues to do its best to tackle the issue. Some progress is being made now and then. However, not everyone was on board.

You can sit on your hands while all this is happening around you or you can do something about it. Democrat or Republican, Left or Right, it doesn't matter--this problem isn't going away.

Or is it too late?

Should Washington write fair lending laws for students?

See results

What do you think? - Is the student loan industry destroying America?

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    • profile image

      CalobrenaOmai 

      4 years ago

      Student loans are a hassle but I think the issue comes in when employment is involved. Some students can't get work right out of college and can't make loan payments; even the grace period doesn't help some. Plus, not all students are aware of loan programs that base repayment on your personal finances.

      I have 60K+ in loans and they probably would have been higher if not for those caps that were put in place. Bad part about that was that school was still pricey so I couldn't afford to complete my degree even though I had a handful of classes left to take. I'm on delayed payment and am doing a little bit of everything to make income.

      Freelance writing and illustrating is helping but not enough funds are being generated. Finding a way to keep schools from increasing tuition needs to be top priority followed by, or better yet done simultaneously, properly explaining what loans are to students in lingo that is understandable by the common person.

      Nice article by the way.

    • TransplantedSoul profile image

      TransplantedSoul 

      5 years ago

      It is such a hard thing to deal with. Students do need to pay for their education, or it does not mean as much to them. You need to fight for what is important. At the same time, education needs to be reasonably priced so that students don't have a crippling debt. I think in Canada things are much more reasonably priced - you still need to work you butt off to pay for university, but it is possible. For some programs here is it much more expensive. I think incentives that encourage people to work in their filed of study (in the country) could be used to reduce the burden.

    • WriterJanis2 profile image

      WriterJanis2 

      5 years ago

      Wish I had a good answer.

    • Elsie Hagley profile image

      Elsie Hagley 

      5 years ago from New Zealand

      Nice. Thanks for bringing this subject up. In New Zealand we have the same problem. I don't know the answer as ChrisBroome said. Blessed.

    • MJsConsignments profile image

      Michelle 

      5 years ago from Central Ohio, USA

      Great topic and a nice job presenting it.

    • designsbyharriet profile image

      Harriet 

      5 years ago from Indiana

      I wish I knew the answer to this question, but if Baby Boomers are retiring with student loans, this country is in real trouble. Perhaps our government should rethink how loans are handed out and how they should be paid off.

    • cgbroome profile image

      cgbroome 

      5 years ago

      You have a great topic here - one that will create a lot of debate. I do not see any easy solution to fix the problem. However, I believe far too many students simply believe that they shouldn't have to pay their loans back. It's a sign of this generations' philosophy of being "entitled". Generations past got student loans and they paid them back - they didn't whine and moan about them. On the other hand, loans were modest as education required a relatively modest fee (outside of the ivy league colleges). Today, even to go to a local, small town college, runs into the thousands per school year. Kids graduate snowed under debt and, as you mentioned, the job market just isn't there and/or at least the job pay isn't there to be able to pay back the loans in a decent amount of time. I guess what I am getting at is the problem is two fold - greed of lenders and disregard to personal responsibility of the borrower. Both sides need changing but I'm not certain we need more government intervention. Rarely does government intervention fix anything but rather creates a whole new set of problems and breeds more hatred people feel for one another and institutions. Student loans do present a problem but not certain, again, that there is any easy fix.

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