College students are paying large amounts of money on their educations. It is essentially investing in themselves because they hope to make more money from having the degree they paid for. The modern American culture seems to highly promote this decision as the best way to beginning ones own career. This would somewhat explain why students across the country are taking on more student debt on average. Daniel Kurt, quoted the Federal Reserve, saying; "the average student loan debt reached a record high of $38,792 in 2020". With so many people starting their career owing large sums of debt, either they risk not saving enough to have a healthy retirement, they declare bankruptcy, or they do not spend as much on other goods and services. In any case, this student debt is forcing people to spend less money, and is hurting the economy overall.
Some politicians, including Sen. Elizabeth Warren and Minority Leader Chuck Schumer have suggested cancelling some or all of this overwhelming amount of student debt. While on paper it would bring more people into a position to spend money boosting the economy, it is not without its concerns. Kurt describes a "risk of moral hazard" that some analysts are concerned about. That is essentially the concern that people will in turn be less responsible for their actions, expecting that someone else with take care of their problems for them. There are countless more potential risks and benefits of this student loan cancellation idea.
Looking how student loan debt has increased so much over the years is really interesting, and for people of our generation pretty frustrating. Looking at people our parents age they had little to no debt coming out of school and the the price of school has risen at a much higher rate than inflation. I wonder why the price of school has increased so much over the last 30+ years
ReplyDeleteOne reason for this increase in average debt could possibly be due to an increasing number of students going into college. A lot more students from a low-income family are going to college and taking out student loans to fund their education. This is obviously a good thing that more people are getting education but several of these students will be paying off their debt for several years. This only will deter kids from pursuing college if they can not afford it without loans.
ReplyDeleteI think the increase in student debt is most likely because average tuitions have increased dramatically over the past few decades, as well as the fact that people who once felt like they might not have had the chance to go to college because of their financial position now are, and are taking out debt to finance their education. I liked how you talked about how this student debt causes people to spend less and is hurting the economy, but I wonder how much more college students really would spend if portions of their student debts were cancelled, and if people really would become less responsible with their actions if they didn't owe as much.
ReplyDeleteNowadays, in high school you are thought that going to college will increase your success later on in life. This causes more people to go to college, which could be the reason for the increase in average tuition. More student loans are given. This could be the cause of the increase in average student loan debt. I agree that there needs to be a solution to this big amount of debt. Moral hazard is a real concern, this makes me curious if there ever be a solution to this problem.
ReplyDeleteStudent debt has been a very controversial topic over the past few years. I think any time that we are talking about canceling student debt there will always be those who are for and against it. While canceling student debt would allow grads to spend more of their income in on goods and services, it would also discourage lending from firms. Firms would be less willing to lend money to students for higher education which could cause a number of issues. However, I do believe there is a significant issue with the cost of higher education and how it is funded.
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