While the recession hits its low points in America, political lobbyists and the public are bringing attention to the problems that face graduating students in this country. Due to skyrocketing tuition costs and budget cuts throughout the university system, many students are forced to take out student loans to finance their college education. Going to college is viewed as a necessity for many professions, but one of the problems that students face today is crippling loan debt and a lack of available jobs on the market.
Many recent graduates work multiple jobs just to make ends meet, and yet are unable to support themselves or bolster the economy with spending, buying homes, or starting business ventures. This loan crisis has become such a problem that many are advocating forgiving student loans completely. Is this a good idea for our economy, would that step even be possible, and are there any other options?
Those who argue and petition for the forgiveness of student loans in their entirety illustrate that the pros of forgiving student debt could include huge positive impact on the economy. The basis for this viewpoint lies in the fact that in America, the accumulated student loan debt equals almost a trillion dollars, and could be doing more harm than good for the economy. Many students are excited about this idea, and an online petition started through change.org accrued over 700,000 signatures in little under a month. There is no doubt that loan forgiveness would be a relief to stress graduates and their family members, but that forgiveness would not come without a price.
The economists and other experts who are concerned about the possibility of forgiving all student loans argue that the negative consequences of forgiving student debt across the board includes the destruction of the loan system in general. According to Mitchell Weiss, for example, the loan program is built on trust from the lender that eventually the borrower will pay back the loan. Negative fallback from loan forgiveness could include an increase in interest rates from loan companies and increased difficulties of procuring loans for future students. Loan companies might stop lending money for school altogether, if they feel the loans will just be forgiven later.
There is also a potential problem with universal loan forgiveness in terms of federal student loans. Those loans come in part from taxpayer money, and if all students stop paying their loans at once, the government could lose a pretty large source of its revenue for paying taxpayers back.
However, the opposing viewpoint would argue that with students more able to freely control their money, they will feel more inclined to spend and invest in their country’s economy through homeownership especially, which has suffered tremendously as a market in recent years.
Potential for other routes of action lie in graduated repayment plans, some of which are already taking shape from the Obama administration. For example, if you sign up for special consolidated loans, you can get your loans forgiven. However, the forgiveness of your loans comes only after you have made the monthly payments on your loans for 30 years. For federal loans, there are also many options for income-based repayment, graduated repayment, and various flexible repayment plans that can work with students’ personal needs.
Student debt rates have skyrocketed in recent years and are negatively impacting our economy and our citizens, and are a concern for those on in both major political parties. However, there may not be a way to forgive student loan debt completely without taking away some revenue from businesses and the government. Although there are some alternatives, only time will be able to tell which route would be best.
This article was Karl Stockton for the team at www.therapistschools.com. Stockton writes frequently about current events, politics, and education. Visit TS in the future to learn more about their fantastic educational opportunities.