By: Daniel Nardini
There is now more talk about reforming the entire student loan process. The U.S. Department of Education has seen how the federal government student loan program is in fact not only not helping students but may in fact bring serious damage to the economy. First, an estimated 40 percent of all students who take out student loans do not graduate from college within a six year period. Those who do may take as long as ten to 20 years (with the average being 15 years) to repay their student loans. The average debt a college student accumulates from the loans they borrow is over $35,000. However, for certain professions (such as doctors), the amount of money that has to be paid back can be well over $100,000.
All of this is having a major impact on the economy now and will have a greater impact on the economy and indeed on American society. Students forced to repay student loans mean that they may delay buying homes or even getting married and hence starting families. The crushing burden of student loan debt means that many students and former students will be repaying off mountains of debt and unable to put money directly into the economy. Worse, many young people who have outstanding academic ability may not be able to go to college because they cannot afford it and do not want to be saddled with tens and even hundreds of thousands of dollars of debt. The disarray of the federal student loan program means now that more and more young people are not opting to go on to college.
This is in fact disastrous for the United States which will need more than ever high academic ability people with college diplomas. As part of the Health Care and Education Reconciliation Act passed in 2010, the Act (proposed by U.S. President Barack Obama) would limit the amount of loan interest rate to 10 percent once a student graduates. But this does nothing about the increase in interest students must pay from one year of college to the next. And since 2003, the interest rate on student loans has more than doubled from 2.3 percent to 6.8 percent—well outstripping the percentage of the American household income increase during the same period. The Act also helps students with loan forgiveness after a ten or 20 year period if former students do public service.
While this may help many students and former students, the high costs of tuition in many colleges and universities (especially private ones) is far from helping the situation. U.S. President Obama stated that America should again become the nation with the most college graduates in the world by 2020. Under the circumstances, this may be pretty optimistic at best. Far more reform may be needed if student loans can be more affordable and can be paid back.
Reforming the Whole Student Loan Process
By: Daniel Nardini
All of this is having a major impact on the economy now and will have a greater impact on the economy and indeed on American society. Students forced to repay student loans mean that they may delay buying homes or even getting married and hence starting families. The crushing burden of student loan debt means that many students and former students will be repaying off mountains of debt and unable to put money directly into the economy. Worse, many young people who have outstanding academic ability may not be able to go to college because they cannot afford it and do not want to be saddled with tens and even hundreds of thousands of dollars of debt. The disarray of the federal student loan program means now that more and more young people are not opting to go on to college.
This is in fact disastrous for the United States which will need more than ever high academic ability people with college diplomas. As part of the Health Care and Education Reconciliation Act passed in 2010, the Act (proposed by U.S. President Barack Obama) would limit the amount of loan interest rate to 10 percent once a student graduates. But this does nothing about the increase in interest students must pay from one year of college to the next. And since 2003, the interest rate on student loans has more than doubled from 2.3 percent to 6.8 percent—well outstripping the percentage of the American household income increase during the same period. The Act also helps students with loan forgiveness after a ten or 20 year period if former students do public service.
While this may help many students and former students, the high costs of tuition in many colleges and universities (especially private ones) is far from helping the situation. U.S. President Obama stated that America should again become the nation with the most college graduates in the world by 2020. Under the circumstances, this may be pretty optimistic at best. Far more reform may be needed if student loans can be more affordable and can be paid back.