The True Cost of College

Young Worried Woman Calculating Bills At HomeFor years, young people from any background have been able to get loans from the federal government for the purpose of going to college. Students have had access to up to $57,500 for college and even more if they continue on to graduate school.

However, supporters of this traditional student loan program could be in for a shock if opposition has their way. A controversial new idea is rapidly gaining support from Americans everywhere: stop letting everyone borrow money.

By not imposing underwritten standards, the federal government has been pretty successful at offering most of America’s youth a chance at paying for higher education, regardless of their ability to pay that money back.

Today, federal student loan debt sits at $1.2 trillion with a delinquency rate of at least 12 percent. If you don’t count the students that are currently taking classes, the number of people who haven’t made a payment on their student debt in the past three months is almost 25 percent. Seven million student borrowers have not made any payments in at least a year. Let those numbers marinate for a minute.

Why Is Student Loan Debt So High?

Many experts believe that a huge influx of “nontraditional students” – students enrolled in for-profit schools – is a big reason for the recent surge in student debt. These for-profit schools generally have diminished or nonexistent academic standards and coax students into borrowing as much as possible.

These predatory actions have made a huge negative impact on the student loan program. Students at for-profit schools reportedly make up about two-thirds of loan defaults.

Another reason is that too many students are taking on the debt when they are not ready for it. Research shows that defaulted borrowers typically have low credit scores (below 599), come from poor families, and are unprepared to handle the high workload.

Essentially, economists are arguing that America is heading for a very serious financial crisis much like the mortgage crash in 2008. Student loan debt is growing out of control because there is not a screening system.

“It’s not a gift to a poor person who is not going to be able to complete a degree program to give them a loan,” says Stanford University economics professor Caroline Hoxby.

What Can Be Done to Avert the Student Debt Crisis?

A number of solutions for student debt have been proposed. The Obama administration has begun to cut funding to career training schools that have a history of racking up high student debt and leaving graduates with little income or aid.

Some experts propose offering more grants for first year students, allowing them to take on loans only after completing the first year.

Hillary Clinton’s idea to start holding universities liable for defaulted loans has seen rapidly increasing support.

None of these plans, however, include a way to solve the $1.2 trillion issue that is currently crushing our nation’s student borrowers.