This year, student loan debt has greatly surpassed the total credit card debt in the United States. By graduation of May 2012, the total amount of student loan debt altogether is projected to reach $1 trillion.
Last year, the average student accumulated approximately $25,000 in federal student loans. This doesn’t even include the private bank loans taken out for education.
ABC News recently did a report on the issue and thousands of students wrote in describing the amount of their total student debt, including both private and federal loans. The numbers went as high as $100-$120,000 in debt. One single parent mom even cited that by the time she is finished paying her loans off, her baby will just be beginning her first year of college.
At Vanguard University, according to the Financial Aid Office, about 75 percent of students take out the maximum amount of Stafford Loans, with about 50 percent of those students taking out private loans as well.
This epidemic has harsh consequences. Students graduating with their Bachelors often have to move back home because they can’t afford to have a career and live on their own due to paying back student loans. In addition to this, because of the economy, it’s harder for students to find good jobs upon graduation.
According to the Economic Policy Institute, the unemployment rate for college graduates younger than 25 was 9.3 percent in 2010 and one-third of all college graduates end up taking jobs that don’t require college degrees.
Statistics report that over 18,000 parking lot attendees, 317,000 waiters/waitresses, 365,000 cashiers and 24.5 percent of all retail persons hold college degrees. These factors makes it even harder to pay back student debt.
Obama has provided some solutions for the student loan debt epidemic. One of them was to make all Federal Student and Plus loans go through the government instead of the big banks.
His other solution is a Student Loan forgiveness plan, which will adjust monthly payments according to income, so that no one would be paying more than 10 percent of his or her discretionary income on paying back student loans.
“Because of this new law, we could see approximately 1.6 million Americans’ student loan payments go down by hundreds of dollars a month,” Obama said.
Neither of the solutions resolve the fact that colleges across the board have increased tuition, that students have to take out large amounts of loans to get degrees, or the job crises in which a majority of college graduates find themselves upon graduation.
“It’s better to pay off the loans quicker because some loans gain interest over time, meaning you’re paying more than you took out. Also, later in life you will have the cost of having a family, which has gone up in recent years,” sophomore Matt Johnson, said.
The ideology behind Obama’s second solution is that decreasing monthly payments means that students have more money each month to afford to live on their own. However, it also means that the loan takes longer to pay back. The new loan forgiveness program wouldn’t be in effect until next year, however, which means it wouldn’t apply to students who have loans taken out this year or in prior years.
By definition, this solution does not fall into the category of a loan forgiveness program. For example, the student loan forgiveness program designed for teachers forgives their loans entirely after they have worked in education for 15 years. There is also a loan forgiveness program designed for people who serve in not-for-profit organizations that forgives their debt entirely.
The new law would go into effect next year, affecting the classes of 2012 and after.