If you are a student in India, your life is pretty good. Many Banks are ready to give you loans. Generally, there is a moratorium. In some cases, parents are prepared to bear it. I am sure there are some defaults, but the issue is not what it is in the US.
Because in US, It is an issue worth $1.75 trillion. $1,750,000,000,000.
The issue is so big that 44 million people are directly or indirectly affected by it. That is 13% of their population. So, yes, the US education system is undoubtedly one of the best, but it comes with a cost.
The term Generation Z refers to any individual born between 1995 and 2010.
Generation Zers are climbing a longer academic ladder. As a result, they are more likely to pursue college compared to earlier generations, according to the Pew Research Center. Among 18– to 21-year-olds no longer in high school in 2018, 57% were enrolled in a two- or four-year college. This same statistic was five percentage points lower — at 52% — for Millennials in 2003 and 14 percentage points lower — at 43% — for members of Generation X in 1987.
The Annie E. Casey Foundation’s KIDS COUNT Data Center reports a similar pro-education trend. From 2000 to 2018, the share of 16– to 19-year-olds who were not high school students or high school graduates dropped from 11% to just 4%. At the same time, the share of 18– to 24-year-olds who were college students or college graduates jumped from 36% to 49%. Members of Generation Z who come from immigrant families are less likely to experience language barriers. From 2000 to 2003, 22% of kids in immigrant families reported not speaking English “very well.” By 2018, just 13% of kids in immigrant families fit this same statistic.
All of that came with the cost.
Per some calculations of Federal reserves in Sept 2021, $1.73 trillion is the size of student debt, making it one of the most significant parts of overall debt in the US banking system. Federal student loan debt alone totals $1.61 trillion. 15% of all American adults report they have outstanding undergraduate student debt. 42.9 million federal borrowers and 3 million private borrowers owe student loan debt.
So what just happened? why such high levels of debt?
The issue was not always significant. For example, in 2007, it was merely $0.57 trillion First big spike came in 2011, From $0.76 to $0.93 trillion.
The average 1996 graduate left school owing $12,750 ($21,930 in 2021 dollars) in student loan debt. Just over ten years later, 1996 graduates with loans owed an average of $16,500 ($22,110 in 2021 dollars) each.
Should a borrower fall behind on payments, the resulting impact on their credit score puts other forms of debt relief, such as refinancing, beyond reach. In addition, the borrower often falls deeper into debt by losing access to additional lines of credit, such as an auto loan, mortgage, or loans to pursue a higher degree.
So from where does it all start?
From the point where US wealthy people want reduced taxes and privatize every Government company.
There is another aspect of this story. College fees in the US have increased 1200% since 1980 vs. average Inflation of 236%. Around 10% rise in college fees between 2003-04 vs. inflation 2.9. More shocking was 2008, when Inflation was negative by 15%, and tuition fees were up by 6.4%. At the same timespan, college enrollment was reduced, and wages went down. Only 58% of men and 66% of women completed college in the age group 16-24.
One of my favorite channels, TLDR news, highlighted it perfectly. WW2. was a point when the US was becoming mature. It was like a whole country fighting irrespective of race and religion. Eight presidents were part of World war 2. Republicans and Democrats were the same. Dwight Eisenhower (R), John F Kennedy(D), Lindon B Johnson (D), Richard Nixon (R), Gerald Ford(R), jimmy carter (D), Ronald Reagan (R), Georg H W Bush(R) all served in world war 2. The end of world war 2 saw 12.2 million Americans were part of the armed forces.
American government helped those people in many ways, passing various bills. Serviceman’s readjustment bill 1944 was one part of it. Due to that, Harvard, Princeton, and Yale, which were considered clubs of wealthy people, came within the budget of the common public. That helps as many veterans as 7.8 million. College enrolment was the highest in 1960.
With higher students, more teachers are needed and so does extra facilities. Here start the era of an increase in tuition fees. The higher number of graduates was something to be appreciated in the US. So the US government kept their support because during the time of the cold war, the Space race was going on. for the development of NASA and their all system, college graduates were needed. So there came the national defense education act 1958, higher education act 1965, which created scholarships, and more money for education. That was also the time of low-interest rates.
College enrolment was 11.5 million in 1979. many new jobs were started stating that a college degree is required. President Lindon B johnson once said that higher education is not a luxury but a necessity. Yes, He was right. But due to his own decision, this whole party went wrong.
Vietnam war.
A war always needs money. It is like that black hole that keeps on eating resources.
Due to this, it was difficult for the government to lend directly. So then came SLM Corporation (commonly known as Sallie Mae; originally the Student Loan Marketing Association). As the government was part, college admission increased among women and minorities, and the scheme was successful.
Another thing went wrong. Ronald Reagan’s presidency. Less tax, More free markets. State Government decided to cut spending on various things. The list which received less government spending was primarily educational. After that, college education became more dependent on taxpayers’ money, changing to college fees. In 1997, Bill Clinton’s government decided to sell Sallie Mae and privatize it. George bush’s government completed it. In 2004. Sallie Mae was a Private and for-profit organization. There was even a try to make it privately owned with the help of some private equity investors. This changed their structure, and the company started charging more interest and disbursing more loans. The company also lobbied and made education loans impossible to clear during bankruptcy. So now, even if you are bankrupt due to an education loan, No bankruptcy will help you. Higher education act 1965 amendment 1998 made it a little more complicated by saying that education loans will be discharged only if causing undue hardship. Now how to know what undue hardship is. The threshold for this in education loans is way higher.
At the same time, employers expected higher education, forcing more people to enter college.
That is why this vast college debt is an issue. It is
