Higher Education And The Consequences Of The Rising...

Presidential candidates are predicting the next economic crisis facing our country is the rising student loan debt (Josuweit, 2015). Some refer to it as a â€Å"generational time-bomb ticking with adults under age 35 disproportionately bearing the brunt of escalating inequality† (Collins, 2015). Today’s college graduates are entering an economy with stagnant wages and a government that can no longer afford to provide a safety net. This paper will examine the economic benefits of higher education and the consequences of the rising student loan debt to the nation as a whole. Magnitude of the Student Loan Debt Crisis One in five U.S. households is affected by student loan debt. Forty-one million Americans carry student loan debt with a median†¦show more content†¦The federal direct loan program allows students to borrow a maximum of $5,500 in their first year of college, $6,500 in their second year, and $7,500 in their third and fourth years of undergraduate education (Education, Loans: subsidized and unsubsidized, n.d.). Since these amounts are far below the annual cost of approximately $23,872 to attend a four year institution (the most recent data as of 2012-2013 included tuition, fees, room and board), the financial aid office assembles a package of private loans, often with interest rates as high as 18%, compared to 6% for federal student loans (Education, Tuition costs of colleges and universities, 2013). Ninety percent of student loans other than the federal direct loans require a cosigner with good credit history (Education, Tuition costs of colleges and universities, 2013; Kaspe rkevic, 2014). As the cost of college continues to rise above the rate of inflation each year, more and more students are turning to private loans to finance their education. In the 2014-2015 academic year, lenders made $6.7 billion in new private loans, which represents 7 to 10 percent of the total debt (Neubecker, 2015). Why is Student Debt Growing? A 2012 study done by Harvard University and the University of Virginia reported a sharp rise in private-sector borrowing to finance higher education; the total debt grew from $1.5 billion (constant 2009 dollars) in 1995-96 to $21.8