What is the nature of student loans and how do they hurt Americans? Well, the first clue is to look at the structure of a normal loan in the free market. Loans allow people to borrow vast amounts of money they wouldn’t ordinarily have access to. This is great for the free market. If you want something you can’t afford outright, you get a loan.
In exchange for that loan, it’s expected that you make payments. Interest is most likely tacked on, making the loan worth it for the bank. They make money on their loans. If you don’t pay your loan back, the lender can come after you. They can repossess the item purchased with the loan. There’s always a bit of give-and-take.
In order to qualify for a normal loan, you have to show some type of responsibility. Credit history, work history. A record of on-time payments. A decent credit score. These are staples of the lending industry. Of course, student loans are completely different. They don’t operate the same way other loans do.
For one thing, consider your education. If you can’t pay back your student loans, no one can come in and repossess your education. Because of that, it makes offering student loans a risky proposition. Yet, the government guarantees loans to students through the Higher Education Act which was passed in 1965.
The Harmful Consequences of Guaranteed Student Loans
You might think guaranteed student loans is a great thing. Someone who wants to go to school gets the opportunity to do so. It’s the American Dream, right? You get to go to the school you want, have your education, and graduate. Then comes the part we all love, getting the job we worked so hard for!
But, in reality, that’s when the problems really start. Millennials are the most educated generation America has ever seen. No other generation saw as many students go to college and get a degree than this one. The problem is, so many of them had to rely on student loans. By the time they graduated, they racked up tens of thousands of dollars’ worth of debt.
For years, young Americans have had it pounded into their brains that they needed to go to school. It was almost as if going to college was an automatic decision and it was the ONLY way they’d make it. Sadly, that’s not true. There are plenty of better options for a lot of young Americans. For example, going to a trade school doesn’t require 4 years. Trade jobs are in high-demand and pay decently well.
Worthless Classes Never Pay Off
Having secured finance options saw a lot of students apply for college to get a 4-year degree. That’s where another phase of the problem set up. Schools had to create more programs and curriculums for the ever-expanding interests of their students. Colleges were mostly for those interested in math or science. So, what about the students not interested in those courses?
That’s right, schools expanded arts and humanities. As the demand increased, so did the price of tuition. Universities knew people would pay whatever they had to in order to attend. That meant schools could really charge whatever they want. Before anyone knew it, a single textbook could cost hundreds of dollars.
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It didn’t matter to students all too much. Why? Well, because they have access to student loans. They could take out more money as they needed it. With the expectation of their degree paying off, students didn’t care how much they borrowed. That mindset completely bites them in the end. They didn’t anticipate what would happen after they graduate.
People with no real work or credit history are able to take out between $38,000 and $165,000. Financially, that’s a major burden to really start life with. Even with a great job market, students aren’t entering the workforce making the kind of money they thought they would. In the end, their lives were ruined, unable to pay even basic bills.
