What comes to your mind when you think about a University? Studies, books, professors, friends, various networks, parties? What about money? Not many people are aware of the fact that every medal has its reverse. In Europe, higher education obtains much more government subsidies, so student loans are much less common comparing to US. However, even if one receive a free of charge education, he or she still needs to pay a rent, cover fees and taxes, buy books and so on.
Student debt is a rapidly growing issue all over the world. Roughly, 70% of academy graduates leave school with student loan debt, compared to not more than 50% twenty years ago. These days, student debt is the second-largest source of consumer debt in the US, beating credit card and car loan debt and it is headed only by mortgages. Constantly rising costs of university education and continuous unemployment and underemployment of college graduates, a student loan debt starts to become one of the major issues in the nearest future — and it has the possible strength to harm economy and enforce crisis.
In the beginning of the month The Wall Street Journal published the article, which claims that approximately seven in 10 seniors are about to graduate from American’s colleges this spring borrowed for their education with a record-setting average of $37,000 in debt. It should be taken into consideration that for instance software engineers are paid more compared to teachers. It makes a potential year of paying off a debt significantly vary. While yesterday’s students are still paying for their education, tomorrow`s students are taking more loans.
Researchers at StartClass (an education research website in the USA) used Federal Reserve data from 2006 to 2015 to evaluate the per-second growth rate in student loan balances. They subtracted the amount of remaining student debt in the first quarter of 2006 from the amount of remaining student loan debt in the first quarter of 2015 and divided that number by the number of seconds in a quarter and then divided that by the number of quarters between the first quarter of 2006 and first quarter of 2015. That let them to create a special clock, which presents a cumulative student debt in the USA.
The outstanding balance of the nation’s student loans is growing by an estimated $2,726.27 every second. As legislators and experts debate ways to challenge Americans’ $1.3 trillion in student loan debt, this student-loan debt clock provides a window into the growing hazards to the economy as well as to student loan debtors and their families.
Many would say that there is an opportunity to get a scholarship. Yes, it is possible. However, frankly speaking, the amount of applicants overbid the amount of scholarships. What is more, not everyone can show an outstanding result in studies, so these students have even less chances to have a scholarship and as a result get their degree due to financial problems. In the USA a Student financial aid exists, which should help students to cover costs associated with attending a college. The aid based on calculations of the Expected Family Contribution. This is fundamentally how much the government considers that families can afford to pay for their kid’s education. It is found on a compound formula, which takes into consideration earnings, assets and other indicators. Using this formula, colleges calculate how much need-based financial support a student need to receive.
The drawback is that this formula does not take into account any family expenditures, any necessities for saving for retirement and possible costs of saving for another kid’s in a family college education. Therefore, while the government may be concerned that one is able to donate thousands of dollars, he or she may not have this opportunity. For instance, if the cost of attending is $55,000 and the parent’s cumulative Expected Family Contribution is $47,000, the student will not receive more than $8,000 in the financial aid. That is called ‘too rich for financial aid’.
According to Anne Campbell, an English Labour Party politician, a former Member of Parliament (MP) for Cambridge from 1992 to 2005: “Poorer students take out larger loans and will have to contribute more to the cost of higher education”. About 40 million American students are carrying some loans and about 70% of students graduate college with a burden. In addition, less than 40 % are paying down the debt. As a result not being able to pay down a debt may automatically make one’s kids to get a student loan as well, which creates a vicious circle. It may influence generations; this also excludes these students from evolving an economy (a burden prevent buying cars, houses, starting a new business).
So do we need such an education or not and what is its real price?
- Josh Mitchell, The Wall Street Journal: Student Debt Is About to Set Another Record, But the Picture Isn’t All Bad
- Robert Farrington, Forbes, Too Poor For College, Too Rich For Financial Aid
- Jillian Berman, Market Watch, Watch America’s student-loan debt grow $2,726 every second
- The Short Version, Student Debt
- Gecko & Fly, 10 Quotes on College Student Loan and Debt Forgiveness