Student loan debt is rapidly becoming America’s next debt crisis.
When you graduate, according to a statistic by the Center for Michigan, you’re likely to have somewhere around $20,000 in student loan obligations, which is only a piece of the pie. Your $20,000 is a piece of the $1.8 billion in Michigan student debt which itself is a fraction of the over $1 trillion in national student loan debt which is increasing at a rate of $2,800 every second.
This debt is exploding far faster than the average cost of living and magnitudes faster than credit card debt. The Center for Michigan study showed that over the last ten years, American student debt increased by about $6,000 per student; Michigan’s student debt average increased by $9,000 over the same span of time.
Student loans are going nuclear.
“I think I paid less for my first home than you will in tuition,” law professor Ashlyn Kuersten told her Civil Liberties class several years ago when discussing the state of public education funding. And she’s probably right. The Center for Michigan figures exclude graduate loans and personal education or Parent Plus loans; adding those in can reasonably come out to $80,000.
So, the numbers are big. Bigger than they’ve ever been, but are they really bad enough to cause another problem like the housing crisis in 2008? Probably not; student loans are notoriously hard to discharge (paying it off and dying are the only practical ways to discharge student debts). However, the rapid increase in average debt and the sluggish economy is making a lot of lenders nervous, and nervous lenders can massively prolong the already slow economic recovery.
When considering the trouble a lot of graduates are having finding work, that nervousness is understandable. It can be hard to pay down a debt that size without employment. Two-thirds of lenders expected more students to not pay back their loans than in the past, which causes the lenders to be less likely to authorize loans, which makes it harder for low-income and middle-class students to receive an education. And they have reasons to be as nervous as they are.
A quick way to see for yourself the potential for disaster and why some students move back in with parents is provided by the website Inside Higher Ed, which encourages you to look up the starting salary in your field and compare it to the $80,000 average debt to attain a master’s degree, or even the much lower $20,000 in loans for an education at Western. The article goes on to discuss some ideas institutions can use to combat the ever-rising debt burden their students carry.
As this simple test will show you, it can be hard to budget for most career paths with this burden on the shoulders of a graduate who may or may not even receive a job in their field. This not only harms the lending institutions but the consumer sector as well, as more and more of a graduate’s salary must be devoted to paying down the loans that spiral out of control by the second.
But at least Western has a lower average debt than the other Michigan universities, so there’s that.
Editor: Noel Carlson