Good The Effect Of Student Loan Debts Essay Example

The national student debts level is 1.2 trillion dollars. This is a staggering amount considering that the student loan program only started around the late 1970’s. The purpose of loaning money to students is to help those with financial difficulty to graduate from college and find a well-paying job in order to pay back the loan. The bill started from a good moral cause, but has resulted in disastrous consequences for the students. The loan program has had serious consequences for students, such rising tuition, delaying home ownership, and slowing the economy.
The rise of student loan debt is like the game “loan”. Many politicians said: “vote for me and I will provide you with more accessible student loans.” Many college students were fooled by these types of lies. But it is the same politicians, in league with colleges, who promised students more financial which that caused college tuition to become more expensive in the first place. According to Bloomberg News, college tuition has risen over one thousand percent from 1978 to 2015. Over the same period, inflation has been only 265 percent. Student loans are a type of loan that the government is happy to give to student while it collects interest. But student loans also mean colleges have no incentive to cut cost. Rather, it gives colleges an incentive to raise costs.
The rise of student loan debt is also delaying the home ownership. Average student loan debt in America is $28,400 per borrower. Among those borrowers, only 56% graduated with a bachelor degree. And after graduation, the borrowers have to spend the next 10-30 years to slowly pay off their student loans thus delaying home ownership. Further, if a student is late with a payment, his or her credit score will be affected—student loans cannot be defaulted on, which mean even the students file for bankruptcy, they still have to pay it back. Lastly, student loans have a higher than average interest rate (approximately 4.66 percent). This high interest rate makes student loans some of the hardest loans to pay off.
Lastly, the rise of the student loan debt hinders economic growth. The rise of debt decreases the amount people willing to buy luxury items. During the past ten years, the “Index of Consumer Sentiment and Consumer Confidence” has reached a record low. 57% of people report that student loan affects how they shop. Further, people with student loan debt cannot save up the money required to start a job-creating small business. Lastly, high level of personal debt leaves the economy more vulnerable to economic shocks because people cannot save to prepare for the worst.
In conclusion, student loan creates an economic environment in which colleges have no incentive to cut the costs; student loans delay the homeownership, and hinder economic growth. Student have to understand that student loans are not free money. Parents have to educate their children in such a way that they understand the consequences of taking out a student loans. “The Game of Loans” is rigged. Be smart and you might be the person to overcome the student loan crisis.