U.S. student debt has climbed at a faster rate in 2018 than at any other time in our nation’s history. When compared to all other forms of debt, it ranks #2 behind mortgage debt. Yes, student debt is higher than credit card and automotive debt. That’s very difficult to imagine! A lot of it has to do with the number of new students going to college.
Our population is growing and the vast majority of young people plan to go to college. It’s also the next generation who will be saddled with more student debt than their parents and grandparents…maybe even combined! But, as more young people go to school, the more money they’ll borrow.
Of course, that’s not necessarily bad. Going to college is a right of passage. If you want the higher paying jobs, then a degree is necessary. By 2020, it’s expected that as much as 65% of all job offers will most likely require a minimum of a bachelor’s degree. This is because technology is advancing and the job market is changing as a whole.
But doing something with your degree depends on the economy. Millennials today not only have higher amounts of student debt, they also can’t find work. They’ve needed to fight to overcome the Great Recession that hit the past decade. Many millions of students went to college when work was scarce and graduated to find they had no opportunities.
Are College Degrees Still an Investment in Your Future?
When many people start college, they think of it as an investment in their future. Except, they can’t afford the extremely high price of going to a good school. Community college is reasonably priced when compared to a university. The problem is, the cost of a college education has quadrupled in the last 30 years.
College now requires the person to acquire as much as $25,000 worth of debt just for a bachelor’s degree. Private colleges are even more expensive, sometimes as high as $50,000. The only way to make it for millions of students is to pile on student debt in record amounts. They sign the dotted line because it seems worthwhile.
But, by the time they graduate and it’s time to pay up, many begin to regret their decisions. They are frustrated that they didn’t plan better or fully understand how difficult it would be. Millennials have a reputation for still living at home after graduation, and this is why. They simply can’t afford their student debt payments.
Student Debt and the Economy
The average monthly payment students are required to pay back on their loan is $351. This payment sticks with them, sometimes for decades! Many pay on their debt for years, but interest has only piled on to the total. This only makes their situation worse. It’s so bad, nearly 10% of all student debt holders default after just two years.
The worst part is, there is no help for them. They cannot declare bankruptcy and wipe it away. Not paying on it and default doesn’t stop the total from increasing. It also won’t fall off your credit after a certain period of time. If you have student debt, it’s yours for life until it’s paid off. That’s a major problem.
The problem is growing exponentially. The Brookings Institute says that by 2023, 40% of all student debt holders will default. CNBC calls this debt a bubble, but MarketWatch and Fox News don’t hold back when saying it’s a crisis. It’s like the Great Recession all over again. Lenders will have to be rescued by the taxpayers.
How does this look for the long term? Well, young adults cannot afford to buy cars. They’re putting off major life decisions, like having children and getting married. They can’t get a mortgage. And they’re broke. Jobs have been scarce for the better part of a decade. Millennials are so broke, in fact, that they’re killing numerous industries.
The experts, like Fed Chief Jerome Powell, are expecting the worst. “It’s not something you can pick up in the day right now, but as student loans continue to grow they can absolutely hold back growth,” he warned.
Time will only tell what happens from here.