Harsh Reality Of U.S. Graduates Student

Availing education loan for higher studies has become ubiquitous in every country of the world. High fees and other costs involving higher educations may not be affordable for every student. Many students avail loans to study in one of the top U.S. universities and this leads to piled up debts in banks. The U.S. graduates have been living in the harsh reality now. According to information from Federal Reserve Bank of New York, the amount borrowed for education loan has surpassed all other types of consumer debts including mortgage, credit cards, auto loans, and others. As the per statistics of fourth quarter of 2017, student debt contributed to 10.5 percent of $13.1 trillion in household debt. The huge burden of debt on young Americans, having entry-level wages and salaries presents obstacle to large purchases such as houses and cars. Fed Chairman Jerome Powell outlined the concern in front of lawmakers in Capitol Hill, highlighting growing student debts could hold back growth.

As wages were raised minimally during the expansion of economy, borrowers would take many years or even decades to pay off loans. The value of student loans rose 153 percent over the past decade, according to the recent data by Fed. As compared to the raise in value of student debt, there has been 31 percent rise in worker pay, as per the report by Bureau of Economic Analysis data. However, businesses have given modest paychecks though the labor market tightened. Loan payments have become the second-largest expense after mortgage payments and rents.

According to insights by the New York Fed data, nearly 11 percent of student loans were in delinquency of at least 90 days or in default. This is almost three times of the share of auto loans, according to the bank. Half of the loans are in deferment and not considered in repayment cycles. Those students attending for-profit institutions and two-year colleges may be one of the crucial reasons behind the increase in delinquency rate. Because, many students either dropped out or failed get a decent job after college, according to the research by Brookings Institution. Students attending for-profit institutions fail behind debt repayments as compared to students attending public or full-time institutions. The results from Federal Reserve showed that 22 percent at for-profit schools failed to repay their loans as compared to six percent at public institutions.

“The for-profits charge higher prices for the same program as the not-for-profits and have much higher default rates,” said Anthony Carnevale, director of Georgetown University’s Center on Education and the Workforce. “On the other hand, there are lots of for-profits in which the awards, whether they’re certificates or degrees, are worth it. The point being, you need a system that disallows programs that aren’t worth it.”

He added that education is worth the money. There needs to be transparency in higher-education system to translate college programs in job employment. As the debts pile up, it puts pressure on economy of the country. As the pressure builds up and economy does not grow, it affects citizen of the country. So, universities need to devise programs to improve job employment.