Why Student Loan Debts Are on the Increase
Student loan debts is fast becoming a monster in America today. Student loans keep increasing on a yearly basis. I don’t know if other people feel the same way I feel. I am of the opinion that if the rising student loan debts in America is not quickly addressed, it might lead to systemic collapse of the economy. What do you want to say about investors’ money if people are unable to pay back their loans? Well, I leave that one for the people in the position to take decision in that regard. But the questions we need to ask is that, why are student loan debts are on the rise? May be, answers to this question may be the beginning of solution to the problem. Below are few reasons I have identified as the causes of the rising student loan debts in the country.
Rising College Costs: There is no gainsay in mentioning that the tuition fees for colleges and university are becoming too much expensive. It is difficult for an average student to pay for his education program without resorting to borrowing. Based on the recent student loans statistics released by the Federal Reserve Bank, 44.2 million Americans owe over $1.47 trillion in student loan debts. This figure is staggering. Many students graduating from public, private non-profit and private for profit colleges now come out with loads of student loan debts. There was a time I was surfing internet, I couldn’t place a particular number to the advertisements on different university degree programs I came across. And I know that online adverts for university degree programs are not cheap. I concluded in my heart that that must be one of the reasons for the rising costs of tuition fees across the country as they need to recover their costs. Colleges and universities are now in serious competition. Students seem to be the victims of this.
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Rising Number of School Intakes: If you want to scale high in your career, you may need to have at least university first degree. Students are aware of this. That is why you see people enrolling in one program or the other in order to boost their profiles. Going back to school does not mean that the students have the means. A lot of them depend on student loans. So, with more people enrolling in colleges and universities, you should not be surprised about the rising student loan debts we witness these days.
Unemployment/Under-employment: Not all those who that fall behind in their student loans repayment take delight in doing that. People usually obtain student loans with the aim that they will get a lucrative job immediately so that they can start paying down their loans from their salary. No sooner they graduated from school than they realised that they were wrong. Some of them are finding it difficult to get a good job while some are working on a job that can barely meet their basic needs. That is why a large number of student loans are either in delinquency or default. Limiting the amount a student borrows to the minimum may help both the lenders and borrowers.
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Making Minimum Payment: In order to avoid default, it is still better to make minimum payment every month. However, the problem with making minimum payment is that, whatever amount that is being paid will be going mainly towards the payment of the interest on the student loans while the principal remains. The will make the student loan to last for several years before it is finally liquidated.