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The Lifelong Implications of Student Debt

With the new year in full swing, many high school seniors have submitted their college applications and are anxiously awaiting their admissions decisions. But almost more nerve-wracking than admissions decisions are financial aid and scholarship awards. For the majority of students, receiving merit-based or need-based aid is their only chance to reduce student debt before graduating from university. 

In the past decade, countless headlines about millennial college graduates with staggering amounts of debt have made national news. However, student loans are not a recent development. The first federal student financial aid program began with the Higher Education Act of 1965. This act gave more federal aid to colleges and universities, created scholarship programs, and allowed low and middle-income students to take out low-interest loans to help finance their education, to name a few. Soon after, in the 1970s, borrowing increased as college costs also increased. Then, in the 1980s, so many students were taking out loans that the U.S. government began to put limits on borrowing. In the HEA Reauthorization Act of 1986, students who had defaulted (violated their contract) on their loans were prohibited from taking out new federal loans. However, with college costs skyrocketing, many students were having issues with being able to pay back their loans. The increase of student debt eventually led to President Obama signing an executive order to create the Pay As You Earn Act in 2011. This plan allows students to make payments on their loans based on what their income is, instead of the payments being based on what they still owe. 

But despite the countless plans, laws, and acts, student loan debt is a bigger problem now than it ever used to be. According to a 2018 report by the Federal Reserve Bank of New York, 44 million Americans hold $1.47 trillion in student debt. This means that 1 in 5 American adults have some form of student debt. In the space of ten years, student debt has skyrocketed from $772 billion in 2009 to $1.47 trillion in 2019 – a 107% increase.

Surprisingly, Americans aged 60 or older, not younger Americans, are the fastest-growing borrowing group that is taking on student loan debt. This is because they may still be struggling to pay off their own debt or because they took it on for their children’s or grandchildren’s education. If both senior Americans and more worryingly, young Americans are those affected most by student debt, there will be lasting social implications.

Unfortunately, we have already begun to see some of these implications in the last few years. One of the most popular headlines of the past decade besides the apparent Millennial student debt problem were the “Millennials are killing…” headlines. Although it can be fun to read these articles, many of the things being “killed,” such as beer or tuxedos, are undeniably expensive. It’s very possible that with the severe increase in college costs and, consequently, student loans, many young Americans cannot afford things that their parents might have had at their age. 

Not being able to afford tuxedos or beer may seem like small problems, but there are deeper ramifications. If Americans in their 20s and 30s are struggling to pay off their student debt, it is more likely than not that many of those people adding another long-term cost to their lives by having children. Along with housing and childcare becoming more costly, the birthrate in America has been tanking since 2007. Even more worrisome, in 2018, the birthrate hit a 32-year low. 

Without even taking continually rising college costs into account, student loan debt is a recipe for social and financial disaster. With the 2020 Presidential Election coming up soon, there have been many proposals on the Democratic side about forgiving and cancelling student loan debt. While these plans are popular and certainly could have good things about them, such as financially freeing people up so they may start businesses or have children when they otherwise wouldn’t have, there are also potential problems. One of these could be students feeling more free to take out more loan money than they would have had student loan forgiveness not existed. Luckily, with every problem, there is a solution. But, with student debt, that solution may have to be a compromise between full loan forgiveness and full loan payback.

References

<https://today.tamu.edu/2019/09/26/fall-2019-enrollment/> – Cover Image

<https://www.investopedia.com/terms/h/higher-education-act-of-1965-hea.asp> – HEA of 1965

<https://www.finaid.org/educators/history.phtml> – Loan history

<https://www.thebalance.com/what-does-it-mean-to-default-on-a-loan-4684116> – Default explanation

<https://www.studentdebtrelief.us/repayment-plans/obama-pay-as-you-earn-repayment-plan-paye/> – PAYE 2011

<https://lookingback.luminafoundation.org> – Detailed history of student loan/debt

<https://www.kxan.com/news/education/fafsa-application-period-opens-tuesday/> – FAFSA Image

<https://www.nbcnews.com/news/us-news/student-loan-statistics-2019-n997836> – Student debt gravity

<https://vinepair.com/articles/millennials-killing-craft-beer/> – Millennials are killing…Image

<https://www.pop.org/why-americas-birth-rate-is-still-tanking-the-cost-of-raising-a-child-and-lost-millennial-wealth/> – Reasons for birthrate falling

<https://www.cdc.gov/nchs/data/vsrr/vsrr-007-508.pdf> – Data on birthrate

<https://www.cnbc.com/2019/12/30/student-debt-totals-increased-by-107percent-this-decade.html> – Increase in debt

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