The Increasing Student Debts in America and the Possible Solutions

The Students’ Debt Crisis in America
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The Students’ Debt Crisis in America
Introduction
The cost of higher education in the United States has been soaring at a concerning rate. Trends indicate that it has surpassed many other developed nations, such as France, the United Kingdom, Japan, and Germany. Nissen et al. (2019) claim that progressing to institutions of higher learning has been closely correlated to success in life, including improved income and diverse opportunities. As a result, learners and their families sacrifice their money to achieve this worthwhile goal and increase their probability of becoming renowned members of their society. Unfortunately, they must borrow money to meet the financial demands, which plunges them into debt. This trend has raised a divisive discourse as different experts explore the concerning issue of financial distress among graduates years after their graduation. Their worries are consistent with findings by researchers such as Ripley (2018), who reveal that student loans have been skyrocketing dramatically in recent decades. She claims that these loans have isolated themselves as the only consumer debt section with rapid cumulative growth over the decades. Questions have emerged that the government is barely doing enough to alleviate this situation, worsening the crisis. However, many professionals have explored solutions, affirming the urgency to address the financial costs and offload the burden from millions of American students.
Background to the Problem
Trends depict a worrying picture about student loans in the last decade. For instance, evidence reveals that it has increased by over 157 percent during this period (Roseth, 2019). Estimates further indicate the county’s federal student load is beyond $1.3 trillion and continues to rise rapidly (Ulbrich & Kirk, 2017). As a result of its ballooning nature, financial experts have expressed concern that the next group of graduates may become overwhelmed and end up defaulting on their debts. Evidence is already demonstrating that a significant proportion of these beneficiaries cannot repay the loans consistently. For instance, one out of every ten loanees delays their repayments by about three months (Yannelis, 2021). In May 2015, the Federal Reserve Bank of New York stated in its quarterly report that student debt stood at 1.1 trillion dollars (Edwards, 2016). This figure arises from the increased borrowing by learners to meet the rising university fees and expenses due to more competition for admission slots (Simon, 2020). It is so worrying that this quotation outmatches the vehicle loan debt, which stood at $968 billion by the time (Edwards, 2016). Moreover, financial analysts indicate that the figure will rise in the next five years since more students are applying for college education and getting admitted. Such statistics illustrate how concerning student debt is in the U.S.
The federal government’s practice of subsidizing these loads is one of the concerning aspects that keeps drawing students to incur this burden. It creates an impression that they can access higher education while systematically plunging them into debts that might take decades for them to repay. Moreover, the structuring of these loans influences the courses that the learners pursue, which denies them an opportunity to choose careers that might make them more competitive in the job market (Archibald & Feldman, 2011). If one wants to enroll in courses with higher market demands, they will incur more debts. As a result, a significant proportion settles in the already crowded industries, negatively impacting their capacity to repay these loans. Archibald and Feldman (2011) underscore that the increased demand for loans is a recipe for a national disaster that demands urgent attention. The government must devise sustainable solutions to ensure that learning institutions continue to supply the market with appropriate graduates without burdening them with loans.
Possible solutions to the problem
Financial Proposals
Experts have highlighted that structured loan forgiveness could be a progressive approach to solving the ongoing challenge. Ulbrich and Kirk (2017) argue that expanding the leniency characterizing the public student loan forgiveness (PSLF) program may be a feasible option for assisting the overburdened graduates. This approach could help those who fail to acquire sufficient income to offset their debts from incurring excessive interests common with private loans. It can also assist students who fail to complete their studies. Hoffowe (2019) indicates that the government should avail this option for these groups because they earn significantly lesser than their counterparts who complete their studies. However, this solution should be well-structured to avoid negative implications. Although loan forgiveness is a progressive idea for unburdening students, it negatively affects the taxpayers (Huffman, 2020). It encourages applicants to borrow excessive amounts of money to attend university, contributing to higher education costs for citizens (Roseth, 2019). For instance, President Barack Obama’s unilateral move in 2014 to expand this approach cost taxpayers almost $22 billion (Edwards, 2016). As a result, the administration should limit loan forgiveness to specific learners through structured financial assessment to prevent unnecessary transfer of the burden to the taxpayer.
Other stakeholders have underlined the value of free college education as a permanent solution to ballooning student debts in the nation. This concept arises from the demands for the government to prioritize college education as an essential service. Some of the suggested elements in this program include free tuition by public colleges, the elimination of interests on student loans, or a rapid reduction of the interest rates (Roseth, 2019). Such an approach allows students to quickly pay their debts, enabling low-income students to utilize financial help to pay for accommodation, equipment, and other living costs. Yannelis (2021) indicates that zero-interest payments or significantly reduced student loan interests allow them to refinance their debts more affordably under less pressure from the government. These facets create an environment where college students can pay their debts on flexible and manageable terms, building an improved atmosphere for higher education systems.
Financial experts have also floated the idea of consolidating income-driven repayment. This federal option offers the students a choice of repaying their loan based on a percentage of their income. The strategy serves as a robust safety net against the looming debt catastrophe. In this context, the Department of Education (2021) indicates that the four income-driven choices include REPAYE Plan, the PAYE Plan, IBR Plan, and the ICR Plan. Stakeholders should streamline them into a more efficacy-based program where an automated system controls the enrollment into the repayment plans against the demand for loans. These four options provide students with more flexibility to pay off their loans depending on the level of income earned per annum. Thus, the government should streamline the repayment plans to alleviate discrepancies in federal financial statements and ensure that student loan repayments are regular and continuous.
           The expansion of Pell grants is a fundamental way of preventing students from s...