More than 43 million Americans (about 13 percent of the population) are struggling to repay student loans, which total more than $1.6 trillion. That's almost as much as Australia's GDP ($1.69 trillion). What's worse, debts, although paid off regularly, can grow and extend into retirement or beyond.
– I graduated with a debt of $80,000 – admits one of the Americans quoted in a CBS report on student loans. – For 10 years I paid regularly the installments, which totaled $120,000, and I still owe $76,000. How is that even possible – she adds, irritated.
– You have to be 21 to drink in the US. You only have to be 18 to get into debt of $100,000 in student loans – another one says ironically. At the time, she didn't realize that the student loan would follow her for 24 years, and it would disappear not because she paid it off, but because she qualified for loan forgiveness thanks to Joe Biden's program. The previous president proposed debt abolition under several conditions. However, it is already known that the program will not last long, because Donald Trump is already starting to tighten the standards.
Federal data for 2024 shows that borrowers aged 24 and younger owe more than $14,000 on average. Interestingly, after years of paying off loans, borrowers who are now 62 and older have more than $43,000 to repay. It should be noted that some seniors took out student loans to pay for their children's or grandchildren's education. However, most of them are still in debt because of their own education, a study by the National Consumer Law Center found.
In theory, everything seemed fine. Student loans were supposed to open the doors of university to those who could not afford them. Repayment could be done in two ways – either in the form of monthly installments deducted from the salary received, or by taking a job in the public sector in a field related to the completed studies, which would partially or completely eliminate the debt.
So what went wrong? First of all, the cost of college has increased. In 1968, fees ranged from $7,000 to $14,000. Now, you have to pay between $20,000 and $28,000. In addition, after the 2008 crisis, individual states began to reduce their budgets for state universities, which of course caused the universities themselves to raise fees to fill the hole in their budgets. Before 2008, students paid 30 percent of the fees, and the rest was taken on by the “federals.” Today, the trend has reversed and young people have to cover about 80 percent of the costs associated with higher education. According to experts quoted by CBS, this is a creeping “privatization of public higher education.”
Secondly, it is constructed in such a way that when paying the minimum installment, the capital is not repaid, only the interest. For example, with an installment of $707.74, only $64.54 “goes” to the credit account, and $643.20 – to interest.
Next, student loan debt cannot be a reason to file for bankruptcy in the US. It turns out that the law there is more lenient towards gamblers than towards graduates.
Fourth, even “working off” student loans can be problematic. Unfortunately, the procedure for these programs is complicated, and the slightest mistake is costly. Major Heather Tregle decided to serve 10 years in the army in exchange for the cancellation of her student debt. When, after 9 years of fulfilling this obligation (and paying reduced loan installments), she called to check the debt, she was dumbfounded. “It turned out that the installments were being debited from my account, but by 1 cent too little,” she confessed on the program “60 Minutes.” “I was told that I still have 9 years to serve, because partial installments do not count,” she adds. She filed a complaint 3 years ago and there is still no decision in her case.
According to the latest Gallup Lumina Foundation Cost of College report, student loan debt has forced 3 out of 4 borrowers to delay major life events like buying a home, getting married or having a child. Unfortunately, many are considering delaying retirement, too, fearing they’ll take their debt to the grave.
In this situation, the proposal of the Confederation candidate Sławomir Mentzen for paid studies no longer looks so promising.
ed. aw
