Parallels and Downward Slopes: An Insight To College Loans

In Thinking and Writing I was given an assignment to evaluate a current issue and relay the 2012 presidential candidates’ stances on the issue.

 

Parallels and Downward Slopes: An Insight To College Loans

In modern society, the idea that higher education is required for success is implanted into children’s heads very early on in their education experience. As time goes on and the children grow, the fate of this idea is determined by many factors such as environment, the student’s aspirations, and, more importantly, the student’s perception of college. In many lower-income areas, college is seen as a place for students with more intelligence, higher test scores, and, of course, more money. However, the fact is that most students need to receive financial aid and take out loans; in the 2009-2010 school year, 82 percent of all freshman received some form of financial aid, and 53 percent took out loans (Chau). The college loan issue is one driven by both the government and by the higher education institutions; if left unaddressed, will cause a crisis on par with the mortgage crisis of 2007; and has ultimately brought attention to the elephant in the room Americans have ignored for so long – is college for everyone?

The government’s role in the college financing was introduced in 1965, and in 1992 parents were allowed to borrow the cost of attendance after financial aid had been considered (Raum, Lorin). Though the idea behind this was clear, to get more Americans through college to increase the quality of the workforce in America, the burden of debt has escalated from calculated cost to national issue. As of April 2012, the national student loan debt “[surpassed] credit card and auto-loan debt,” raising above $1 trillion (Raum). The cause of this issue is a result of both the perpetrator and the bystanders who idly sat by and did nothing – in this case, the higher education institutions and the active governments during this time of debt building, respectively. “[Charging] as much as they can, and [continuing] to expand,” colleges and universities have had their part in growing the debt by way of the “multibillion-dollar building boom” that has occurred in recent years; this has put the institutions in debt themselves, with approximately “$211 billion of outstanding debt” incurred by more than 500 colleges and institutions as of 2011 (Lorin). At the same time, no government administration, neither Republican or Democrat, has intervened. Rather, they ignored the fact that tuition was “increasing far faster than the rate of inflation,” and instead decided the “path of least resistance” would be to simply to issue more loans (Lorin). The lack of action “[left] loans to balloon” to a level that “[shocked] even the system’s own architects;” there was a group that saw the issue coming, though (Lorin).

William Brewer, president of the National Association of Consumer Bankruptcy Attorneys, issued a critical warning to the public: “As bankruptcy lawyers, we’re the first to see the cracks in the foundation. We were warning of mortgage problems in 2006 and 2007. The industry was saying we’ve got it under control. Nobody had it under control. Now we’re seeing the same signs of distress. We’re seeing huge defaults on student loans and people driven into financial difficulties because of them,” (Raum). Brewer makes his point clear – student loan debts are an issue with the potential to escalate to the level of the subprime mortgage crisis. This crisis resulted in a recession that, between June 2007 and November 2008, cost Americans “more than a quarter of their net worth,” and, all factors considered, Americans lost “a staggering $8.3 trillion” in household assets (Subprime 13). Most disturbingly, though, is that “in all corners of the world…as far away as Australia, Thailand, and Germany,” countries “were surprised to find that problems with United States homeowners could be felt so keenly in their home markets” (Anderson and Timmons). Clearly, when we run into problems with our financial sector in America it has a dramatic affect not only on Americans, but on the entire world itself; with this in mind, it becomes extremely irresponsible to ignore signs suggesting this scenario is dreadfully near.

Ignoring the warnings, some polls indicate that over 90 percent of parents expect their children to go to college (Raum). A 2011 Harvard University report suggests that a large part of the problem is that too many students are attending four-year degrees “when two-year and other programs may better prepare them for the workforce,” and Robert Schwartz, the academic dean at Harvard’s education school, suggests that students better consider if their debt will be worth it before “mindlessly drifting into college,” (Lorin). The last graduating class to be unaffected by the recession resulting from the subprime mortgage crisis was the class of 2007; the clearest indicator of this is the fact that they “graduated into a workforce with an unemployment rate below 5 percent” (Johnson). The national unemployment rate has since peaked at 10 percent in October of 2009, and was 8.1 percent as recently as August of 2012 (Bureau of Labor Statistics). A recent survey “found that more than half of U.S. Adults said higher education failed to prove ‘good value’ for the money” (Lorin). The sentiment that simply going to college isn’t enough to find Americans a job is clear, however the facts point to a more serious issue.

With the 2012 presidential election just around the corner, Democratic nominee Barack Obama and Republican nominee Mitt Romney have “back and forth”-ed about many issues, this one included. Obama’s arguments include references to what he’s done to help students afford college, including: “a tax credit for college students worth up to $10,000 over four years;” a law “to cap…loan payments at 10 percent of [student’s] disposable income, and have the remainder…forgiven after 10 to 20 years;” and changes in “the loan system so that all federal loans originate directly with the federal government,” (Khadaroo). Romney’s plans include propositions to “reverse the ‘nationalizing’ of student loans,” (Khadaroo). Meanwhile college loans are at a level of debt that is tinkering on the edge of a national, if not international, crisis; unemployment is decreasing far slower than it rose, and there is a growing consensus that a college education is not guaranteed to help the issue. Although modern America works on the Utopianistic ideal of “college for all,” the result of this principle is evidence against itself. Higher education is certainly commendable, but perhaps it’s time that our society realizes that, at least in our current conditions, it is not what everyone needs. The reality may seem harsh to some, but the consequences of our actions so far and the risks of continuing down the path are worse. As it stands, attending college will almost certainly require some degree of student loans, and the education you pay for is not guaranteed to be worth it.

Works Cited

Anderson, Jenny and Timmons, Heather. “Why a U.S. Subprime Mortgage Crisis Is Felt Around the World.” The New York Times. The New York Times Company., August 31, 2007. Web. September 20, 2012.

Chau, Joanna. “More Students Are Enrolled in College and on Financial Aid, Annual Report Shows.” The Chronicle of Higher Education. The Chronicle of Higher Education., March 27, 2012. Web. September 20, 2012.

Bureau of Labor Statistics. “Labor Force Statistics from the Current Population Survey.” United States Department of Labor. Web. September 20, 2012.

Johnson, Jenna. “A College’s Class of 2007 Reunites and Reflects on the Cruel Economic Times After Graduation.” Washington Post 13 July 2012. Gale Opposing Viewpoints In Context. Web. September 20, 2012

Khadaroo, Stacy Teicher. “Obama vs. Romney 101: 5 differences on education.” DC Decoder. The Christian Science Monitor. Web. September 26, 2012.

Lorin, Janet. “College loan debt burden grows.” The Charlotte Observer. The McClatchy Company., July 14, 2012. Web. September 20, 2012.

Raum, Tom. “Recover threatened by runaway student loan debt.” The Boston Globe. Associated Press., April 3, 2012. Web. September 20, 2012.

Subprime mortgage crisis. “Subprime mortgage crisis.” University of North Carolina at Chapel Hill. Web. September 20, 2012. <http://www.stat.unc.edu/&gt;

 

Parallels and Downward Slopes: An Insight To College Loans

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