It’s a simple question with a complex answer: should Uncle Sam be making a profit when it comes to student loans? After all, the program is there to help young Americans upstart their dreams, so why should the government benefit like a business in the private sector?
There are arguments supporting both sides, but first, you should know that the government will bring in an estimated $110 billion over the next decade. Of course, we must take into account that the number can’t be fully reviewed because of the President’s debt forgiveness plan that won’t fully start until 2017. Since the new program could erase the debt for over a quarter of borrowers, no one really knows how much will be forgiven. Then we need to find out how the remaining money will be used.
Sure, the government might need it to cover the balance of what’s been borrowed, or it could be placed into a reserve to strengthen the program and allow more students to borrow in their times of need. But then there’s another concern. What if the government is using the money to fund completely different programs? That has some people seeing red.
Student Loans: The New Economic Time Bomb
That’s the sound of the new economic time bomb in America. According to new findings, an incredible 11.3 per cent of student loans are now 90 days or more past due. To clarify, that adds up to over $100 billion. And it’s a problem that’s only getting worse.
Young Americans are borrowing money to attend college with no real consideration for their ability to repay the debt taken into account. For example, a fine arts graduate earning $25,000 a year is facing a debt of $50,000 in student loans that will take decades to pay off. In fact, our own Commander and Chief, President Barack Obama, finally paid off his student loans in 2008 – and he was about to become the leader of the free world.
This ever-increasing pool of delinquent debt won’t only impact the debtors themselves, but it also ll become a significant burden on the econell. Students with defaulted loans could mean that they never truly become productive members of society. In theory, they will buy fewer cars, save less for retirement, and ultimately have a more stressful life because of the black cloud looming over their heads.
Once upon a time, a person could pay off his or her student loans by having a part-time job. Around the same time, having a college education made sense, regardless of the cost or the major. But that time has long since passed, and with an estimated 11.3 percent in delinquency, it’s a situation that will only get worse.
Luckily, there might be a light at the end of the tunnel. The private sector is creating opportunities for people to refinance their student loan debt if they have a good job and income. At least 19 student loan refinance options exist, and if a twenty-something has an interest rate above 6 percent, they could find themselves receiving a much lower rate with these new providers. In addition, new legislation has provided those with student loan debt to lower their payments with an income-driven repayment plan designed to make the debt more manageable by reducing what is owed every month.
However, a study done by USA Today claims that “Congress directed the Government Accountability Office to conduct a study on the true cost of the federal student loan programs” and found out that there is “little to no profit.”
Ultimately, students will continue to seek placement at institutions of higher learning, and the government will continue to loan out funds to make those dreams a reality. Sure, they may benefit in the long run by making money off those loans, but since they risk having none of it ever paid back, can they be faulted for it? It is the student’s responsibility to find an affordable payment plan and accept the responsibility of one’s own debt instead of pawning it off to the rest of the taxpayers to shoulder.