Student Loan Crisis In America

Since the wake of the Great Recession many people were affected are still struggling to make up their loses. Recession was the penuchle of the student loan debt crisis. The Crisis not only affects students and parents but lenders, employers, taxpayers and colleges. The Great Recession helped push student debt passed $1. 5 trillion, up from about $671 billion at the beginning of 2008. Students who graduated college with student debt during the Great Recession are feeling the impact on their lives like never before today.

Much like fixing the problems in the healthcare industry, solving the student loan crisis is incredibly difficult. Prior to the late 20th century, having a college degree wasn't nearly as important as it is now. Today, most jobs require having a college degree. In the past, if you were a college graduate, you were considered to be in the minority. As the need for college education increased, so did the price of colleges. And because of this, student loans have become a must for those who are not able to afford this very valuable and very expensive education. Students are requesting money in order to cover college costs from the federal government, and in some cases, they are also requesting money from banks as well for private loans. The problem is, in many cases, that students are unable to fully pay back the banks and federal government after graduating. Not too often, the government will provide relief. If worse comes to worse and students become bankrupt, that ruins their credit for the rest of their life.

The most obvious stakeholder in solving the student loan crisis is the people with student debt. Former students and future students are dramatically different groups. For future students, and their parents, major concerns include college access and affordability. Existing borrowers, especially those done with school, are only worried about eliminating debt. One example of these divergent interests would be the bankruptcy proposal. Many consumer advocates think that restoring bankruptcy protections to student loans would increase lender responsibility, and force them to work with borrowers who are struggling. For existing borrowers, adding bankruptcy protections would be a huge win. Even though the majority wouldn’t need bankruptcy, having it as a possibility would be a major asset.

For future students, adding bankruptcy could be a major setback. Without the permanence of student debt, many lenders may choose to raise interest rates, and be more strict about requiring cosigners. This shift could make paying for college more difficult, and limit the ability for some to attend. One of the major players in the student loan world is the schools themselves. This includes everyone from the Ivy League schools to the for-profits. From the schools perspective, they want a steady stream of students and an adequate supply of student loans to allow them to continue to raise prices. The schools will also want to avoid student crisis solutions that could leave educational institutions responsible for unpaid debt.

Colleges and Universities carry great influence in our society as thought leaders and large employers. Many for-profit schools also have very well funded lobbying efforts. The lenders obviously want their money back plus interest. While some may be more socially conscious and ethical than others, at the end of the day they are all businesses out for profit. Most lenders will be opposed to increasing student loan consumer protections, and many have significant influence in Washington due to well paid lobbyists and campaign contributions. The lender who has issued the most student loans is actually the federal government. Taxpayers, at least those without student loans, have a couple major concerns with student debt. Many will see the value of subsidizing education for a smarter workforce, but the less federal spending, the better.

Second, taxpayers want a strong economy. If student loans are dragging down the economy, this is a problem for the average taxpayer. With over 40 million Americans dealing with student debt it is a very large group. It is also worth noting that the average borrower age continues to increase due to parental borrowing for children, as well as larger loan balances to pay off. Despite the large number of student loan borrowers, their influence in Washington seems limited. As a group, their financial resources for lobbying efforts are minimal, and student loan borrowers have not shown up at the polls in sufficient numbers to be a significant factor in many elections. Under President Obama, the federal government will no longer give money to private lending institutions. Private lending institutions were part of the problem in the, so this is a huge step.

Another action they have taken is new borrowers will be eligible for student loan forgiveness after 20 years instead of 25. Money will also be used to fund poor and minority students and increase college funding. The fourth major action they have taken is starting in 2014, borrowers of new loans qualify to make payments based on 10% of their discretionary income, which means the money they have left over after paying for any necessities, such as rent. Recently Donald Trump spoke about his position on the student loan crisis. His response was rather surprising, he was appalled that the federal government was profiting of off federal student loans. “That’s probably one of the only things the government shouldn’t make money off. I think it’s terrible that one of the only profit centers we have is student loans, ” said Trump. Federal Student Loan programs turned a profit of $41. 3 billion in 2013 while many borrowers were struggling to make their financial ends meet. Trump also discussed how he would help solve the student loan problem by creating jobs in the private sector. “I don’t want to raise the minimum wage. I want to create jobs so people can get much more than that, so they can get five times what the minimum wage is,” said Trump. While this is a long-term solution, Trump offered no information on what he would do immediately to help reduce the burden of student loans for millions of borrowers.

Besides the governments many attempts to keep reduce the nations student loan debt employers are taking matters into their own hands. More and more employers are offering to help repay their workers’ student loans as another benefit to attract and retain talent. Private-sector employers are joining many state and local governments, as well as nonprofits, to help more workers repay their student debt, according to the bureau’s report. Employers are offering this help as a benefit, much like helping with 401(k) contributions, and are either paying loan servicing companies directly or through employer-sponsored third-party repayment assistance programs. “These entities note that student loan repayment assistance programs may be a promising way to reduce borrowers’ overall financial stress, but potential barriers to additional innovation exist,” the authors write. “Industry stakeholders highlight a complex process for making third-party payments driven by student loan servicers’ legacy information technology, all-too-frequent payment processing errors, and the servicing industry’s lack of a standardized process for handling third-party payments.”