According to data available online, Student loan debt in the United States totals $1.71 trillion and grows 6 times faster than the nation’s economy. That is more money than many of the third-world countries entire GDP.
It is also reported that,
- 43.2 million student borrowers are in debt by an average of $39,351 each.
- The outstanding Federal Loan Portfolio is over $1.56 trillion.
- Approximately 42.9 million Americans with federal student loan debt each owe an average $36,406 for their federal loans.
- More than 35 million of these borrowers may qualify for student debt relief under the CARES Act of 2020.*
- The average public university student borrows $30,030 to attain a bachelor’s degree.
So, when you look at the numbers it is clear that the Student loan debt crisis is a big problem in the US. But you have to wonder why the worlds largest economy is facing this issue and in this article, I would like to explain it.
History of the Student Loan Debt
Interestingly the student loan debt was introduced as a solution to defeat USSR in the space war that the US was losing at first and it was a great Idea back then because US did not have a lot of scientists because of high cost of higher education. The idea was to invest in the citizens so that they can obtain higher education and later pay it of easily after getting a job. It made sense because the average tuition fee back then was lower to. After the introduction of the program, number of collage students doubled and eventually the US won the space war when they finally sent man on the moon.
The program continued to help millions of Americans getting a college degree which was essential to get a better job.
What Caused the Current Situation-
Before 2010, the US government used to partner with banks to provide low interest loans to student. Fast forward to 2010, College tuition fees have increased at a way higher rate than the inflation. This made it it harder to pay of student loans. At this time, the government decided to cut the middle-man and offer loans directly to the students. Soon enough, the Department of Education became the largest bank in America in term of student loan. To make things easier, the Department of Education decided to let private companies. These companies would collect and manage Student loans on behalf of them. This decision is what caused the current situation.
The private companies that were supposed to help students easily pay off their debt, started to exploit them. Most of these companies have bad customer service. According to many reports, these companies have literally ruined lives of millions of people. So, the current situation is largely blamed on these companies. Then came COVID-19. because of the pandemic, many people lost their job but they still have a crippling debt to pay.
To summarize, The student loan debt crisis is a big problem in the US. It was caused by private companies trying to profit of people who are just trying to pay of their debt, the pandemic made things worse.
“American Rescue Plan Act of 2021” by President Joe Biden can make things better if the bill passes.