Abstract
Millions of college students graduate from institutions with thousands of dollars in student debt. It is a major issue that applies to higher education facilities of all levels: from community colleges to the most prestigious universities and raises concerns among students and their parents. Most of the alumnus are struggling to repay the debts for years ending up in default. Therefore, the purpose of this research is to analyze the impact of student loans on the post-college life of the graduates. The study will also examine how student loans affect higher education institutions and influence high-school graduates’ decisions to attend them. The data mentioned in this research study is retrieved from highly valuable sources, official statistical evidence, and other conducted studies regarding the topic of student debt. As the information of the research is solely based on the borrowed data, the issue requires a more comprehensive investigation. However, the provided material may shed light on the concerning topic and present possible solutions to the problem.
Each year the topic of student debt is becoming more vocal and provokes many protests requiring to design a solution that will be beneficial for both the graduates and the country. Rates of student loan debt are rapidly increasing, reaching an all-time record of $1,6 trillion from 45 million borrowers in 2020 (Friedman, 2020). Such a statistic demonstrates how serious the crisis with student loans is getting, which concerns all age and demographic groups. The financial burden of college graduates affects not only them but also negatively marks the United States economy as only a small percentage of student loans are secured and sold to the investors. The effect of debt in the mid-20s may reflect on the further life quality, as by paying out for higher education, young people are postponing major purchases, holding back on business ideas, and even not saving up for retirement.
Literature Review
The high cost of education and low employment rates are some of the add-in difficulties a graduating college student faces besides thousands of student loan debt. Scholars have theorized that individuals with lower financial abilities are less likely to perform successfully at universities and be academically engaged (Baker & Montalto, 2019). In addition to the high tuition costs, the expenses for housing and maintaining the acceptable level of life reach the numbers as high as a yearly cost of education (Ulbrich & Kirk, 2017). Therefore, college-debt may become a defining reason for a student to reduce the course load or even discontinue the studies at all (Baker & Montalto, 2019). However, despite such challenges, more students choose to pursue higher education each year, with seven out of ten seniors graduating with college debt (Fox et al., 2017). Such a high rate indicates a vital need for scholars and activists to find more affordable solutions for young people regarding this issue.
It is crucial to note that ethnic characteristics, financial status, and academic rates play a significant role in the future ability to pay out student debt. A study by Fox et al. (2017) determined that people of African-American heritage and particularly from community colleges, are at higher risk of experiencing difficulties with repaying their education and more likely to face default. GPA rates that were gained during the process of obtaining a bachelor’s degree also affect a person’s ability to repay the loans. It was proved that university graduates who maintained a high GPA and had detailed course plans were less likely to experience repayment hardships (Fox et al., 2017). Student debt has a surprising effect on the personal and marital life of individuals. A study by Elliott and Lewis (2015) discovered that college debt creates an embedded thought process, convincing that it does not allow graduates to properly take part in their social life. Furthermore, high student debt lowers the possibility of marriage for young people as it brings uncertainty and less satisfaction with marriage as a whole.
The country’s economic state is impacted by high student loan debts as well. The recent market trends show that it is less likely to be affected by the top college and its negligence than it was by the mortgage crisis (Di & Edmiston, 2015). As most student loans have low security and are rarely sold to the investors, these factors negatively impact the country’s financial state. During the past ten years, the amount of student debt has increased by 170%, which indicates the young people’s inability to repay the cost of their education (Fox et al., 2017). The reduction of college debt can positively affect the economic sector and the labor market for future alumni (Di & Edmiston, 2015). Therefore, much more attention to the issue of student debt loans must be paid as it impacts many vital areas responsible for sustainable living.
Taking into consideration the significant influence of student debt on the economy and post-graduate life of young people, it is vital to inform the students about all the aspects regarding the responsibility of taking a student loan. It is crucial to notify the borrowers of different terms, delinquency statuses, and guidelines for default. The study highly recommends that universities consider adding programs that teach students about personal finances and their management to have a clearer understanding of their future duties as adults (Ulbrich & Kirk, 2017). Fox’s research (2017) revealed that a person’s knowledge of financial management practices could reduce the difficulties with repaying the loans. Moreover, students whose parents educated them on financial responsibilities demonstrate a more favorable economic behavior, consequently having fewer challenges upon college debt repayment (Fox et al., 2017). Therefore, to inform the indebted alumni of all the aspects, it is the primary responsibility of the loaner to explain the strategies and educate on all the scenarios of repayment (Ulbrich & Kirk, 2017). With such actions, universities can help individuals be more aware of their financial statuses and set realistic goals and expectations for the future.
Scholars have studied the notion of default among the graduates unable to make repayments on their student loans. If a person experiences 270 days delay in payments, the bank automatically puts the student loan in default (Di & Edmiston, 2015). Fox et al. (2017) report that currently, there are more than 850,000 defaulted student loans, adding up to over $8 billion, with community colleges having the highest rates. A study by Elliott and Lewis (2015) discovered that some of the people who are more likely to default are those from low-income households or youth of color as they are prompt to have inconsistent income after graduating. Default status creates numerous financial difficulties and deprives students of many benefits like receiving financial aid or security benefits. (Fox et al., 2017).
Moreover, the longer time it takes to pursue the degree, the higher the cost for it will be, which is another issue for some students who graduate with medical or law degrees, for instance (Baker & Montalto, 2019). A recent study indicated the change in student loan debt of pharmaceutical students, which escalated from $101,892 in 2009 to $163,494 in 2017 (Ulbrich & Kirk, 2017). Some students who face hardships with repayment during college may decide to quit pursuing higher education to decrease the amount of student debt (Fox et al. 2017). The factor of upcoming loans can evidently be one of the most discouraging and frustrating for a person, which may provoke unpleasant consequences.
Discussion
Impact of Student Loans on the Post-Graduate Life
Based on the literature review, the issue of student loan debt is of primary significance that contributes to creating additional problems not only to the graduates and their families but also to the country’s economic and political state. The current study complements existing data concerning the topic of college debt by providing evidence on the impact of college debt on the alumni post-academic life and analyses of how the expectation of repayment affects the decisions of high-school graduates to pursue higher education. Regarding current studies, this research paper will propose feasible solutions that will help reduce the possibility of default among scholars and a further rise in student loan debt amount.
As reviewed in the academic literature, it was determined that numerous factors affect a student’s inability to consistently repay student loans from ethnic differences to the financial status of a family. Millions of graduates cannot proceed to pursue their careers or afford basic needs because of a large amount of college debt that deprives them of many benefits. The statistic shows that 40% of borrowers with college debt are expected to default by 2023 (Boggs, 2019). Such numbers call for immediate actions, as the current state of student loan crisis harms both the individuals who are trying to repay them and the country’s financial state.
Among numerous drawbacks and limitations of the student credit existence and low possibility of repaying, it is the high risk of decline for future credits like a house mortgage. Student debt also frequently stands in the way of career development, leading to mass unemployment. The situation can be compared to a vicious circle, as college debt does not let the graduates get a suitable job for repaying it, therefore rising chances for default. Considering the rapid increase in delinquencies and a stable 4% unemployment rate, it is evident that the U.S.’s job market is unable to create enough wage growth for people with college loans to meet requirements for the repayment (Boggs, 2019). Therefore, student debt lowers graduates’ ability to find a suitable job that can cover their loan, consequently raising the chances of default.
Low credit scores caused by student loans lower the possibility of further purchasing of essential things like houses or cars. Despite the needed qualifications, graduates rarely have an opportunity for a well-paid job that matches their set of skills and can start repaying the debt as soon as possible. Given such circumstances, individuals are deprived of promised benefits that were supposed to come with their degree. Scholarship America (2017) has determined that people with high loan payments are 36% less likely to make significant purchases in the future like a house or take a car loan, due to lower credit scores.
In some cases, high school graduates, who consider attending college or a university decide against it because of the anticipating college debt they will have to repay. High-poverty families frequently require financial aid to be accepted to universities; however, not many receive it. Hence, an individual must either choose a school with lower tuition costs or decline the possibility of getting an education. An alternative for some may be attending college only-part time while simultaneously working; however, there is a high chance of not completing the full undergraduate program (Di & Edmiston, 2015). The expectation of benefits from a complete university education is the primary motivational factor for some high-school graduates, however high tuition costs and a possibility of extreme student debt frequently stops them from pursuing the dream.
A goal to achieve a post-graduate degree may be put on hold due to an already existing jumbo student loan. With an average student loan of a university graduate being $20,000, further aspiration of higher education may seem impossible for most people (Friedman, 2020). A more responsible approach to student loans must be agitated to students, as they ought to plan all their expenses ahead, so they could take no more than needed, due to a significant impact of repayment challenges on the further course of life. Thoughtful planning of cost expenses can reduce the amount of college debt and give a person a chance to continue pursuing their academic career.
The financial stress that college youth experiences during their time perceiving higher education may reflect their GPA level. Baker and Montalto (2019) have researched this notion, and indeed after one year, the GPA of students has dropped, which proves that financial stress can reduce cognitive functions and willingness to engage in academic life. Another study has also confirmed that GPA is associated with student loan default, where a third of students who are expected to have difficulties with repayment had a low GPA (Fox et al., 2017). Therefore, many factors influence the ability to repay the college debt; moreover, the expectations of repayment may also affect some individuals to decide whether to pursue higher education.
Policymakers have been paying much attention to the importance of resolving the issue of student loan debts, and simultaneously coming up with ways to make higher education more affordable. Even though many political activists are voicing their ideas toward debt-free education, little to none is being implemented. While trying to resolve the student loan conflict for future undergraduates, policymakers must not forget about millions of Americans with thousands of dollars of debt. Over one-third of the graduates with more than $ 40,000 of debt are paying it off on a repayment plan that connects their monthly income to the payments, stating that otherwise, the student loans are taking up a big part of the profit (Miller et al., 2019). Therefore, student debt has a significant impact on the lives of the borrowers, and majorly influences the country’s economy.
Solutions for Student Loan Crisis
Considering the growing importance and rising rates of default among people with college debt, there is a vital need to find resolutions to theories that scholars have been actively investigating. Models that require determining eligibility for taking loans and the future predisposition to make consistent payments in the future can be adapted. Fox et al. (2017) have similar suggestions, including discussing students’ expectations of repayment difficulties as a way of identifying youth with less financial management abilities, which have higher chances of default. Some borrowers may not be aware of possible penalties they would face in case of not delaying the payment, which may even have an impact on their mental health. Such screening can help target students that need to attend financial management programs.
Among many solutions to the student debt crisis, simple education programs on financial responsibility may be of significant help, as they may decrease delinquencies and defaults in the future. Higher education institutions must be obliged to ensure a student’s full understanding of the student loan cost and provide counseling in case of financial stress or difficulties with repayment. Financial aid offices can also help by identifying students who will most likely have trouble with debt repayment. Identifying potential defaulter can be as simple as asking young people how they expect to repay their debt and what difficulties they may stumble upon, which is a useful technique that may be used as a base for financial education (Di & Edmiston, 2015). In such simple ways, colleges may aid the country decrease the amount of student loan debt.
It is essential to inform students and their families of grants that do not require repayments. As more than 30% of the college students’ tuition is paid by some kind of scholarship, it is vital to know methods and ways of receiving them with no further need for repayment (Scholarship America, 2017). One of the state options to aid the issue of student loan debt is to secure the rights and policies on a legal level, developing a Student Loan Bill of Rights. Such an action can prevent the borrowers from being deluded by companies or poorly advised on repayment conditions. An ombudsman who can fight for the proper measures for students, respond to the complaints, and generally manage the situation must be established in all states. As a consequence, all student loan companies will be more transparent, and fewer conflicts regarding repayment plans will be evoked.
An additional option to partially resolve the student loan crisis is to rely on the taxpayers. It would not be reasonable to shift all $1,5 trillion debt on other people; however, a small percentage can be repaid by the taxpayers as one of the feasible solutions that will evidently decrease the amount of student debt and salvage the country’s economic state. Companies can also contribute to resolving the student debt crisis, where a tax-advantaged benefit to the social packet of a worker can be included, which helps with the college debt repayment.
Significant annual increases in tuition costs are among the main problems that push students to borrow money for their education. The collective sum of university costs, books, accommodation, and other fees has exceeded the inflation rates for many years, making higher education unattainable for most families (Johnson, 2019). Therefore, politicians and activists must continue fighting for cost reduction of higher education; thus, it becomes affordable for each American family.
Conclusion
The growing importance of the student loan crisis has been drawing the attention of not only student activists but also many political figures, trying to make higher education more accessible. Statistics have shown that a large percent of college graduates start their adult life with a massive college debt, which significantly influences the further pursue of career and financial status. With many difficulties that college debt causes to the graduates, there is a vital need to find feasible solutions that will reduce and ultimately eliminate the notion of a student debt crisis. The government cannot only initiate programs that aid with student loan crisis, but the universities themselves must be the primary sources of informing students on all possible challenges student loans may cause.
References
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