GLEN ROSE - Higher education has always been thought of as the way to the American Dream, but financing that college education has lead to financial hardship for many college graduates.
In 2014, a report released by the Institute for College Access & Success (ICAS) Project on Student Debt, stated that seven-out-of-ten public and nonprofit college graduates graduated with outstanding student loan debt, with a debt average of $28,950. About 17-percent of that debt was in private loans, which typically cost more and offer fewer repayment options than federal student loans.
“Borrowers are graduating with a lot more debt than they did 10 years ago, and the class of 2014’s average debt is the highest yet,” said ICAS president Lauren Asher in a press release. “Student debt has rightly become a major policy issue. Students and families need better information and better policies to make college more affordable and debt less burdensome.”
Burdensome is an understatement to the totality of the rising cost of student loan debts.
According to a 2015 quarterly report by the Federal Reserve Bank of New York (FRBNY), the total national student loan debt has reached $1.19 trillion. Research conducted by FRBNY in 2013, found that student loan debt had eclipsed both auto loans and credit card debt, making it the largest form of debt outside of mortgages.
Since student loans are nearly impossible to forgive, many students are now defaulting on their loans. The quarterly report from the FRBNY found that almost seven million Americans have defaulted on student loan repayment.
As student loan debt continues to become a burden on borrowers, policymakers are trying to understand the true impact it is having on their lives.
Recently, U.S. Sen. Charles Schumer (D-NY) has launched an online campaign to hear from college students and parents who are struggling to pay off massive student loan debts.
“With tuition costs continuing to rise, middle-class families and their children are forced to take on significant debts in order to obtain a college diploma. Because of this, student loan debt is a huge burden on the shoulders of millions of young Americans, and it is holding back their ability to achieve the American Dream and is a significant drag on our economy,” said Schumer in a statement.
Since debt is having an impact on millennials and causing them to delay their lives, the nation’s economy suffers from the lack of financial input from the largest workforce. A survey conducted by American Student Assistance found that 35-percent of the respondents found it difficult to buy daily necessities, because of their student loans. Also in the survey 52-percent and 55-percent said that their debt affected their ability to buy a car or purchase a home respectively.
In the same survey a vast majority of respondents said that their ability to pay for their student loans would affect whether they would take a job.
Recently, U.S Rep. Rodney Davis (R-Ill.) and Rep. Gwen Graham (D-Fla.) have introduced the Employer Participation in Student Loan Assistance Act. The legislation would provide a new tool to help employers recruit and keep employees by allowing them to help employees repay student loans with pre-tax dollars. Employers would be able to deduct the subsidy and employees would receive a tax exempt benefit of $5,250 to pay their loans.
Some companies have already taken the initiative to help employees with their student loan debts.
Accounting firm PricewaterhouseCoopers has begun giving certain employees up to $1,200 a year for up to six years to help with student loan debt. Kronos, Inc., a software company pays employees up to $500 a year towards loan debts. Microsoft gives their employees the option to refinance student lows at discounted interest rates.
In order to help combat this issue more needs to be done to increase awareness of college spending.
Students need to be aware of the parameters of their loans and how much they will owe once all is said and done. To possible avoid the debt of student loans, one of the best options for students can do is try to maximize non-loan financial aid. For high school students who are college shopping, that means applying for scholarships, grants, financial aid, and work-study programs to ease the cost of tuition.
As Congress gears up to reauthorize the Higher Education Act -the federal law that governs the administration of federal student aid programs- this year, they need to take into account the rising cost of college tuition versus the stagnant wages in the job market.