The White House Council of Economic Advisors recently released a new report on student loan debt and how it affects the American economy. Many people were disappointed by the report, which stated that overall, student loan debt is helpful to both individuals and the country as a whole.
In the past decade, student loan debt has skyrocketed to over $1.3 trillion, leading many to believe that these loans are out of control. Across the country, advocates have been pushing for student loan reforms and debt forgiveness programs, which is why the findings of the report are so controversial.
According to the White House, student loan debt has nearly doubled since 2009. The White House attributes the rise to the economic recession of the same period. Statistically, as unemployment rises, so does enrollment in colleges and universities. Between 2005 and 2010, enrollment in college jumped by 20%, which was the biggest increase in enrollment since the 1970s.
Many of the people who enroll in colleges and graduate school during times of economic trouble never would have done so if times weren’t tough. When people have a steady income and a decent amount of job security, they are less willing to give that up to go back to school. However, when the economy is bad and everyone is worried about work, there is less to lose by going back to school—especially when student loans will cover the costs.
As a result of the recession, the White House claims that more people enrolled in more schools, including lower-quality schools. When breaking down the data, the White House reported that the students who graduated from their university are managing their debt well overall, even though the amount of debt that they carry has been steadily increasing. The report notes that the students who were unsuccessful and failed or dropped out were having the most difficulty paying off their student loans. According to the report, the dropouts do not contribute much to the health of economy because this group of people is likely to struggle financially anyway.
The White House believes that student loan debt acts as an investment and is not detrimental to the economy. As proof, it cites many studies that show that those with the greatest amount of student loan debt were more likely to be homeowners and less likely to be in default on their student loans. People with hundreds of thousands of dollars in student loan debt are more likely to have attended top-ranked schools, and probably have achieved a Masters or Doctorate degree.
In contrast, people who owe less than $10,000 in student loan debt are more likely to have attended college for a year or two before dropping out. As a result, their income potential and career track may be limited due to their lack of degree. The report found that of all the borrowers who defaulted on their loans within three years, 2/3 owed less than $10,000. More than a third of all defaulters owed less than $5,000.
In these cases, the White House believes that it is the difference in education and thus career opportunities that is the biggest factor in predicting a loan default, not the amount of the debt itself.Dealing with student loan debt can be frustrating, especially if you are one of 7 million Americans who have defaulted on a student loan. This type of debt can be difficult to get rid of, even in bankruptcy, and needs to be dealt with by professionals. If you are struggling with student loan debt or are being harassed by debt collectors, the attorneys at Loan Lawyers can help. Contact our office by calling (888) FIGHT-13 (344-4813) and schedule your appointment today.