Abstract
The U.S. higher education is affordable to many young people but only due to the existence of the student loan system. However, since the tuition costs continue to rise, it often takes longer for many graduates who are either financially illiterate or have low entry salaries to repay their college debts. Therefore, this paper aims to discuss why policymakers should consider student loan forgiveness or relief programs more closely if the government wants to improve the overall well-being of Americans.
Introduction
Higher education is a significant contributor of young professionals to the job market. However, one of the existing problems of college graduates is student debt that varies across different specialties and universities but causes a financial and emotional burden for young people. To alleviate this issue, the U.S. offers three major types of student loans, which are federal, Perkins, and unsubsidized or private. Despite the rising crisis of mental health issues among graduates, the cancelation of student loan reform is still being debated, leaving young workers in the situation of paying off their debts for longer time.
Higher Education Costs
Since the concept of the student loan was introduced in the United States to increase the number of young individuals who can afford it, tuition costs have increased substantially due to inflation. It means that even though workers’ annual salary is higher now, many still must repay debts they acquired while receiving their college degrees. Apart from paying for tuition, students obtain additional obligations because they borrow money for such needs as textbooks, living expenses, and housing (Pisaniello et al., 2019). Those who continue their education in medical schools or other programs requiring further payment have higher debts since the U.S. provides limited support to these students (Pisaniello et al., 2019). Higher education costs were found to be the primary determinants of career choices and decisions to build a family among the youth (Addo & Zhang, 2022; Nissen et al., 2019). The student loan problem is crucial because it affects and still impacts several generations of Americans, making many choose jobs not of their interest. Student debts create even more societal inequality and divide, preventing young people from being involved in resolving critical social issues or pursuing their personal goals.
The Need for Student Debt Relief Program
The U.S. government has discussed the idea of student debt relief for a while, but only minor changes were made to the legislation. In fact, according to the White House (2022), President Biden’s plan will relieve $10,000 of student debt for those who are the most in need. However, considering the fact that, on average, one owes up to $100,000 after graduation, this relief program provides only slight assistance to young people who may or may not have high-paying positions (Pisaniello et al., 2019). This problem is serious for the U.S. since “approximately 45 million American carry $1.7 trillion in student loan debt” (Jackson & Mustaffa, 2022, p. 1). Thus, it should be an alert for the government that such a tremendous number of young workers start their careers with negative bank balances.
Despite the stress of higher education in terms of academic performance, the burden of student loans creates more pressure for individuals. Although it is a good investment for a future career, the fact that one has a significant debt creates unease and causes mental health problems (Nissen et al., 2019). Indeed, any significant financial stress harms emotional and physical well-being, which are inseparable variables in the long term. Research shows that at least one person among 14 respondents in a survey of 2,300 student loan borrowers had suicidal ideation at some point while repaying their debts (Jackson & Mustaffa, 2022). This issue seems complex when a comparison is made across different ethnicities and genders because “the typical Black borrower owes 13% more than they originally borrowed” compared to their White counterparts (Jackson & Mustaffa, 2022, p. 1). The possible reason for this gap is that racial and gender inequality in the job market creates the situation of lower starting salaries for some population groups, preventing faster relief of the debt.
How Can the Country’s Leaders Contribute to Improving Student Debt Reform?
If the federal government wants to improve the nation’s overall well-being, it is essential to start implementing more steps toward student loan relief. Indeed, it is an obligation of the leaders of the country to their voters to develop policies that enable the population’s prosperity in terms of emotional and physical health and help them achieve their goals. Before Biden’s plan was proposed, the U.S. tried to control the situation with college debts, but only federal loans are funded by the government and provide consumer protection (Di Maggio et al., 2019). Therefore, one of the options the policymakers considered was forgiving student debts entirely (Di Maggio et al., 2019). However, one may argue that it will create the problem of quality of education due to reduced funding. In that case, the government should consider regulating university tuition costs to keep them low. At the same time, higher education institutions may be allowed to raise their entry requirements.
Another possible solution for student debt relief programs is improving the financial literacy of young people starting from childhood. Indeed, according to Artavanis and Karra (2020), individuals with lower levels of financial literacy often underestimate their ability to repay student loan payments. Furthermore, such students experience substantial debt-to-income shock post-graduation, which may result in household default (Artavanis & Karra, 2020). Hence, it is crucial to start implementing required courses on financial literacy in middle and high school for children and engage parents in such programs. It can help them better estimate the risk and benefits of selecting a particular college or profession and assist in planning the process of returning their debts. Overall, all these measures can improve the physical and mental health of the nation since people from a young age will have less financial stress and have a lower danger of developing various chronic diseases.
Conclusion
Higher education in the United States is a complex system not only in terms of academic performance but also due to increasing student loans. Since tuition fees and living expenses continue to rise, graduates are left with significant financial obligations for several years after finding employment. It further increases the wage gap between young people of various ethnicities and gender. For example, Black students are more likely to remain in debt for longer compared to their White counterparts. Individuals with lower financial literacy make poorer decisions when repaying their student loans. Moreover, research reveals that student debts cause tremendous emotional stress to borrowers, which may result in depression, anxiety, and some somatic diseases. Knowing the extent of the problem, the federal government strives to control the student loan situation and tries to implement partial relief programs. However, these policies provide only minor help to young people in debt. One of the most straightforward solutions to this problem would be implementing the student debt forgiveness problem, but such legislation may not be universally approved. Thus, another, more realistic way, for now, is to introduce financial literacy programs in schools to teach children how to properly plan their budget for potential long-term obligations.
References
Addo, F. R., & Zhang, X. S. (2022). Gender stratification, racial disparities, and student debt trajectories in young adulthood. Federal Reserve Bank of St. Louis, 1–28.
Artavanis, N., & Karra, S. (2020). Financial literacy and student debt. The European Journal of Finance, 26(4-5), 382-401. Web.
Di Maggio, M., Kalda, A., & Yao, V. (2019). Second chance: Life without student debt. National Bureau of Economic Research, 1-74.
Jackson, V., & Mustaffa, J. B. (2022). Student debt is harming the mental health of black borrowers. Education Trust, 1-6.
Nissen, S., Hayward, B., & McManus, R. (2019). Student debt and well-being: A research agenda. Kōtuitui: New Zealand Journal of Social Sciences Online, 14(2), 245–256. Web.
Pisaniello, M. S., Asahina, A. T., Bacchi, S., Wagner, M., Perry, S. W., Wong, M. L., & Licinio, J. (2019). Effect of medical student debt on mental health, academic performance and specialty choice: A systematic review. BMJ Open, 9(7), 1-15.
The White House. (2022). Fact sheet: President Biden announces student loan relief for borrowers who need it most. Web.