The cost of college education in the U.S soared at an even greater rate than the cost of medical care. Do you know that the U.S student debt has reached the $1 Trillion mark? Now we owe more on student loans than on credit card debt. Incredible, isn’t it?
The cost of higher education is shooting up faster than the rate of inflation. Therefore, a large number of students feel compelled to take a loan in order to fund their education. Close to 8% of the students default on the loans. This is surprisingly close to the default rate of credit cards. How come the cost of college education continues to increase like this? Well, an investigation carried out by a newspaper reveals that the educational institutions tie up with financial organizations and encourage students to borrow. This works particularly in the case of for-profit colleges because a considerable number of students who apply for student loans are from low income households.
Student debt indirectly affects the taxpayers as well because a considerable part of the total student loan comes from the federal government. Are you aware that the Government spent a whooping $24 billion on student loans last year? The educational institutions keep the money when the students default on the loan; so the taxpayers end up as the losers.
Actually, the situation has been deteriorating for the past few years. The number of students defaulting on loans has doubled in the last five years. The number of students who are affected psychologically due to debt is also on the rise. Some students get stressed out due to excessive student debt and drop out of college to look for a job.
Some students do not get stressed about the loan as their parents take care of it on a temporary basis. They believe that once they graduate and get a job, things would work out. Does it really work out? In the current unstable economy, it doesn’t. This is because the earning potential of students after graduating from the college is not really great at the moment. This reduces your chances of clearing huge student debts.
Some experts point out that student loan can weigh even more heavily on a person than a mortgage, a tough statement when you link this to the concept that foreclosure is worse than a natural disaster for the debtor. With a mortgage, you lose your home but after the foreclosure, you don’t have any obligations in most cases. But when it comes to student loans, you can’t just walk away. It is virtually impossible to refinance student loans and there are hardly any consumer protection options available. To make things worse, bankruptcy won’t help you with student loans. This is because student loans are not discharged in bankruptcy and there are few options to deal with student loans outside of bankruptcy.
Higher education lies beyond the reach of most families right now. The options colleges and universities offer include student loans and scholarships. So if someone fails to qualify as an extraordinary student then he or she remains destined for loans at a time when underemployment, unemployment and inflation join hands to make repayment a very difficult proposition.
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The most recent update of this page occurred February 4, 2011.