Student loan debt has been in the headlines since several candidates in our last presidential race offered to provide aid. Why is this even a problem?
Since 2000, student loan debt has doubled. Forty-eight million Americans owe for their college loans. That’s about one in seven Americans. People aged 25 to 34 are the most likely to have student loan debt, but the largest amount is owed by those aged 35 to 49 — more than $600 billion. . Average total student debt continues to hover around $30,000. Although the benefits of a college education outweigh the costs in most cases, many graduates worry that their debt will affect their finances for years to come, redirecting money that could be invested in homes or retirement programs.
In total, this student debt is $1.7 trillion, second only to mortgage debt of $12 trillion. The federal government holds $1.6 trillion of this student loan debt. The US government invests in higher education through need-based scholarships, student loan programs, war veterans stipends, and fellowships; an educated and highly skilled workforce promotes national prosperity. Highly educated workers generate higher tax revenues, are generally more productive and civically engaged, and are less dependent on social programs. Most experts believe that post-secondary education is essential to a dynamic and innovative economy.
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Most countries subsidize higher education to a much higher degree than the United States. And the cost of college education here has skyrocketed, both in public and private colleges. States had contributed much of taxpayer money to public colleges and universities, but after the Great Recession of 2008, most states drastically cut that funding. Since then, the loan balance per borrower has increased by 25%.
Another thing to understand is that one-third of the total debt is held by the seven percent of borrowers who owe more than $100,000. How does this debt get so high? We’ll talk about that next week and see how interest is calculated.
The United States Department of Education currently offers Federal Student Debt Relief for loans due to the government. Visit studentaid.gov/debt-relief for more information. The program offers eligible borrowers full or partial loan release of up to $20,000 for Federal Pell Grant recipients and up to $10,000 for non-Pell Grant recipients. Pell grants are available to low-income students based on their FAFSA. The program is not available for loans from private lenders.