When we think about the greatest threat to the economy today, what comes to mind? Doing the Great Depression it was the volatile stock market, and during the Great Recession of 2007, it was the crumbling housing market. America is no stranger to economic crashes; even the Great Depression is still within our living memory. Today, it’s the massive student loan debt crisis that puts our economy at risk, stifles the future of recent grads, and paints a bleak outlook for incoming students. Another economic collapse may be on the horizon, and it’ll take more than just repaying the loans to stop it.
The Cost Of College Is On The Rise
Over the past three decades, tuition costs rose more than three times. A semester of college in 1987 went from just over $3,000 to nearly $10,000 in 2017 – but this was only the beginning. Between 2006 and 2016, the overall cost of college rose 63%. Past inflation, the financial demands on students are more powerful than ever, graduates walking away with a degree and $28,500 in debt. Today, the total student loan debt value is worth more than Microsoft and Facebook combined with Americans owing over $1.4 trillion.
Financial Ills Start Right After Graduation
For the average recent college grad, life after the debt is a frugal one. With an average monthly payment of $393, millennials and Gen Zers are left with a difficult choice: build a savings nest egg, or pay off student loans right away? Among millennials, 29% have less than $1,000 in savings and 24% have no savings at all. New businesses and entrepreneurship suffer and by age 30, millennials are in fact less likely to start their own business than previous generations, 42% saying that they simply do not have the financial means to start their own business. The outlook for retirement is even bleaker. Already, 31% of millennials predict they will never be able to retire.
Diminished consumer spending means a stagnated economy, one of the most important and telling signs of a future financial crisis. Almost half of Americans are putting off buying a car and one in seven are waiting to get married, as millennials are scared off of debt after considering the burden of their own student loans. Fewer dollars circulating in the economy un-stimulate businesses leading to larger problems down the line, critically slowing economic growth.
Tackling The Coming Student Loan Crisis
Overcoming this crisis will take both compassion and forward-thinking. The greed behind student loan debt collecting may line some pockets now, but we aren’t too far off from an impending financial crisis. From income-based repayment to consolidation, to increased repayment periods, there are already options for individuals managing student loans – but this may not be enough. Radical and game-changing ideas like total federal loan forgiveness and free college hit the issue at its core, and though extreme, show promise as lasting solutions. Germany and Denmark offer options for free public universities, and New York state is already experimenting with tuition for in-state students, challenging the status quo and lowering the pressure and demand to take on a student loan in the first place.
Facing a $1.4 trillion debt won’t be easy, but through big and small changes from financial demands to educational standards, every kind of student will have the education they deserve – without lifelong debt. Learn more about the student loan crisis from this infographic.