The growing student debt bubble

Bruno Beidacki

$1,400,000,000,000.

Americans owe over $1.4 trillion in student loan debt, according the Federal Reserve. That’s more than the gross domestic product of 183 countries. Let’s take that in: Americans owe more in student debt than the total value of everything produced by most countries in the world.

The reason behind such an enormous number is the extremely high cost of higher education in the United States. The Education Department reports 44.2 million Americans owe money tied to their student loans from college.

No one deserves such a financial burden for pursuing more education. Today, college students around the country are graduating and having to take on jobs that don’t require a higher education degree — strictly to repay their loans. That is not only negative for their industries, which are missing out on qualified, educated potential employees, but also for those who do not have a college education.

A single mom working at a fast food chain wants a promotion. Instead of becoming manager because of how long she’s been there, she now has to compete with a recent college graduate who studied business. The college graduate wants to start his own company, but before doing so, he needs a job to pay back his college loans. The single mom doesn’t get the promotion, and the business graduate has to postpone his dreams. It’s a lose-lose.

Someone is winning, however. Private loans are on the rise, which means higher interest rates and a lesser chance of forgiveness. Worse, the standards for being approved for these loans are getting lowered, trapping people who may not be able to pay them back later.

Sound familiar?

This practice is what led to the 2008 financial crisis, the worst economic crisis since the Great Depression of the 1930s. That time, it was the mortgage debt bubble that ended up bursting.

College debt seems to be heading in the same direction. The almost $1.5 trillion owed represents more than 6 percent of the total debt in the United States, an alarmingly high number for an individual industry.

College graduates are finding themselves owing dozens, if not hundreds, of thousands of dollars after finishing their studies. Many of them can’t find a job, and those who do are not making enough money to pay for their basic needs and repay their loans at the same time.

People shouldn’t have to choose between paying their debts or eating lunch.

Solutions are being offered by politicians, think tanks and academics, but most of them only serve to postpone the burden. For-profit companies have taken the opportunity to offer loan refinancing services, which end up extending the deadline in which these loans need to be paid, but not lessening the debt itself.

It’s time for a smartly developed loan forgiveness program. If people cannot find a decent-paying job even after studying for years and putting hard work into their learning experiences, they shouldn’t be forced to pay for an education that has failed them.

If lowering the cost of higher education tuition is unrealistic, let’s at least be empathetic with those who are trying to make a better future for themselves and their families.

After all, the more we push people to get student loans, the closer we get to another financial crisis. And let’s be honest: In a period of severe political and ideological crisis, the last thing we need is for the economy to crash.

Bruno Beidacki is the opinion editor. Contact him at b[email protected]