Part 1
Part 2
I agree with Akers & Chingos (2014) that, “increases in lifetime incomes of college-educated Americans have more than kept pace with increase in debt loads.” According to their research, the average household with student debt has experienced an increase in annual income of $7400 while total debt increased by only eighteen thousand dollars. The statistics show that income of educated Americans has been increasing at a faster rate than the increase in student debt and the increased annual income can pay the additional debt within two to three years (Akers & Chingos, 2014). The increase in borrower’s income indicates increased ability to meet loan obligations as they fall due. The high income of educated Americans makes it possible for them to pay their student’s debt without stretching their income. Currently, working Americans can still acquire several loans and service them alongside the student’s debt because they earn high salaries.
According to Tetlow (2016), graduates are enjoying high salaries currently than they used to enjoy a few years back. Their wages are higher than that of O level workers. The wage gap between the two groups of workers has been increasing since 2000. The increase is attributed to a continuous and rapid increase in wages of degree holders as that of less uneducated counterparts remain the same. This means that educated workers have adequate income to repay their education loan. The majority of the educated workers who are not repaying their student’s loans have the ability to pay but choose not to pay. This is a similar scenario in other types of loans as there are people who obtain credit but are unwilling to repay according to the loan’s terms and condition (Tetlow, 2016).
Americans who acquire an additional loan to finance their post graduate education are also experiencing an increase in wages. According to ormtams (2015), “data from the Financial Times 2015 Global MBA rankings show that the pay increase of younger graduates in the three years after graduation outperforms that of their older counterparts in both percentage terms and absolute terms”. This group of workers experiences an accelerated career growth than the less educated counterparts. They have adequate income to meet their normal expenses and repay their student’s loans. Thus, the increasing student debt will be paid adequately, and there is less likelihood of facing any crisis.
The number of white and blue collar jobs have been increasing as the economy expands. Likewise, the probability, of graduates and diploma holders, of getting jobs is high because the economy has successfully recovered from 2008/2009 financial crisis. The gainful employment provides workers with an adequate and regular flow of income to repay their student’s loans. Employees are also required to inform employers that they have outstanding student’s debts. Besides, employers are required to deduct the monthly installments from employees’ monthly income and wire the money to the relevant financial institution. Thus, availability of formal employment opportunities increases the rate of compliance and decreases the cost of collecting the repayment installments (Friedman, 2016).
On the other hand, many employed graduates are interested in obtaining car loans and mortgages to improve their standards of living. However, before getting the loans, they must show that they have been serving their student loans adequately. Thus, many workers start repaying their student’s debt immediately to increase their chances of obtaining credit and avoid negative credit rating. This increases the rate of repayment of students’ debts.
Part 3
I do not agree with the article finding that, “the increase in student debt since 1989 can be directly attributed to Americans obtaining more education, especially graduate degrees” (Akers & Chingos, 2014). The writer argues that the total increase in debt is attributable to increase in the cost of a graduate degree from ten thousand dollars to over forty thousand dollars. However, the cost of bachelor’s degree increased from six thousand dollars to around sixteen thousand dollars. The writer fails to consider that majority of Americans are diploma and bachelor’s degree holders (Akers & Chingos, 2014). Thus, even if the cost of their tuition education did not increase at the same rate as that of postgraduate students the overall debt burden for the country has increased significantly.
The Reasons Why I Disagree With the Finding
The general tuition fee for college education has increased by over 439% since 1980. The lowest tuition fee for high education is charged by the public universities and colleges. Currently, the mean tuition cost for the public universities is $ 25000. This cost is relatively high for middle-income households battling increased cost of living. Many middle-income households request their children to apply for students loans to finance the tuition and other living costs. It is surprising that between 2000 and 2011 the cost of a degree at public universities increased by over seven percent and the trend is projected to continue. This increasing tuition costs will make many students rely on students loans than on their parents in financing their college education. On the other hand, students are not immune to the increasing cost of living. They have to borrow a lot of money to meet their day to day college expense. Moreover, there is increasing the need for students to acquire laptops and other electronics to cope with technological requirements of a college education. Thus, the increase in overall students’ debt is attributable to both increasing numbers of students relying on loans to finance their education, increasing tuition cost and increase in the cost of living (Ortmans, 2015).
There is an increase in the number of students obtaining loans from private sources. The private sources charge higher interest than government sources and rarely write off student’s loans. However, students are forced to rely on private sources because the government loans cannot adequately cover all students wishing to pursue high education (Austin, 2009). Besides, the government offers a given amount of money that may not be adequate in covering both the living expenses and tuition costs. This high borrowing cost has significantly contributed to increased rate of default as well as an increase in the size of students’ debt.
The amount and number of grants offered by private universities and colleges have fallen rapidly. This is attributed to increased costs of running universities and increase in salaries offered to lecturers in an attempt to attract the most competent staff. The decrease in grants significantly increased the debt burden for students learning in private colleges. On the other hand, states have been cutting funding for public universities, and the general cost of running institutions has been increasing. Thus, universities to increase tuition fee to meet the operational costs and cover the decrease in state funding. It is, therefore, unreasonable to attribute the increase in student debt to increase in the number of Americans perusing graduate degree (Austin, 2009).
References
Akers, B. and M. Chingos. 2014. “Is a Student Loan Crisis on the Horizon?” Brookings. http://www.brookings.edu/research/reports/2014/06/24-student-loan-crisis-akers-chingos
Austin. (2009, January 10). College on credit. Retrieved January 25, 2017, from http://www.economist.com/node/12903475
Friedman. (2016, September 17). Great again? Retrieved January 25, 2017, from http://www.economist.com/news/united-states/21707203-median-incomes-soared-2015-great-again
Ortmans, L. (2015). MBA by numbers: Return on investment. Retrieved January 25, 2017, from https://www.ft.com/content/34ad52ac-dd3d-11e4-bc0d-00144feab7de
Tetlow, G. (2016). “Earnings higher than for non-graduates despite rapid rise in degrees”. Financial Times. Retrieved January 25, 2017, from https://www.ft.com/content/305e85d4-6489-11e6-a08a-c7ac04ef00aa
