Student and Personal Loan Battle in Congress Will Affect Mostly Students
It is not rocket science: For any student to get a decent job, they need to first acquire a college degree. However, getting it might will not come cheaply, as even the most simple college degrees can cost dozens of thousands of dollars. Multiply that by millions of American students that have acquired student or personal loans and the amount owed can be more than all credit card debts put together.
The great risk here for student and personal loan holders is that their debts can easily skyrocket if the U.S. Congress can’t agree to interest rates down on federally subsidized loans. Even so, the cost and amount of student loans in particular are too high, while at the same time the economy hasn’t improved much during the years after the economic crisis.
In the past months however, the issue of both student and personal loans’ costs has gained substantial momentum due to the ongoing presidential pitting between President Obama and Mitt Romney, both of whom have promised to improve this situation. On his part, Obama has been hammering continuously on the need to keep college costs down, also requesting for the Congress to pass a law that would prevent interest rates for federally backed loans from doubling. On his behalf, Romney has mostly echoed the same intention, with the only difference being on the role of the federal government.
Leaving personal loans aside, to get an idea of how serious this issue is when it comes to student loans, the average student in more than 95 U.S. colleges owed a staggering $35,000, and more than 90% of the 2010 class students had some kind of debt due to a student loan. In fact, this situation has become so serious that some economists are even concerned that personal and federal student loans could become U.S. next important financial crisis, not unlike the mortgage bubble preceded it.
As an example of this, we have only to look at how the amount of debt for college graduates has increased, jumping no less than 5% from 2009 to 2010. Much of this increase is due to an increment in tuition fees at most of the country’s universities.
Obviously, legislators agree on that they would like to provide more aid, but that would mean a reduced budget, which is why they suggest it is universities who should cut tuition costs.
In the end, it all comes to the impact generated over students who have either a student or personal loan. Even now – and definitely in the near future – some of them already owe significant amounts of money, which in turn reduces their monthly income drastically due to the payments they must face. This brings an economy in which the new generation has less to spend and to enjoy.
This situation also brings with it another problem, perhaps less noticeable but far more significant: As families and potential students face issues of affordability when it comes to studying, they actually start thinking if the degree they want to pursue worth at all.
The ball is in many universities’s courts now. They can provide an almost immediate solution to this problem, but that would mean reducing their income and getting out of their comfort zones.