In the past year alone, students reportedly took out more than $100 billion in loans.
At the age of 18 it’s hard to fully grasp the weight of student loans. Less than two years earlier you were learning how to drive a car and struggling with the responsibility of walking the dog before school. Now, you’re expected to understand the incredible financial burden of higher education. At that young age the prospect of having $100,000 in outstanding loans upon graduation isn’t tangible — it seems like Monopoly money. However after you walk across that stage and toss your cap in the middle of one of the worst recessions in United States history those zeros get real, and smothering.
College students have been graduating with loans for decades. In the past it’s seemed like a reasonable tradeoff — borrow money to get a degree that paves the way for a career that pays back the loan. It was simple, and the cost of education was cheaper. The current job market has put heavy constraints on recent graduates’ abilities to these repay loans as well as save money.
In fact this plight has gotten so great that according to the Federal Bank of New York national student loan debt has officially exceeded credit card debt. To make matters even worse, unlike with credit cards, declaring bankruptcy doesn’t eliminate student loans.
The credit risk falls on young people who will start adult life deeper in debt, a burden that could place a drag on the economy in the future.
Cost of education
“Students who borrow too much end up delaying life-cycle events such as buying a car, buying a home, getting married (and) having children,” says Mark Kantrowitz, publisher of FinAid.org.
“It’s going to create a generation of wage slavery,” says Nick Pardini, a Villanova University graduate student in finance who has warned on a blog for investors that student loans are the next credit bubble — with borrowers, rather than lenders, as the losers.
Full-time undergraduate students borrowed an average $4,963 in 2010, up 63% from a decade earlier after adjusting for inflation, the College Board reports.
With college getting more and more expensive with every passing year and our economy fluctuating more than the engine temperature on a ’95 Honda Civic with a faulty transmission, the situation isn’t getting any better. Protestors at Occupy Wall Street are petitioning for Obama to eliminate student loan debt as one of their demands. Unfortunately, the prospect of Obama declaring student loan amnesty is nothing more than a pipe dream.
Misery doesn’t vanish for millions with the signing of a pen—that’s just not how the world works. Student loans suck and they’ll continue to suck and they’ll most likely get a lot worse.
Excuse me while I pour myself a drink.