The growing student debt crisis in the United States is created by banks that are targeting students with predatory loan offers, along with a rise in tuition costs associated with the corporatization of higher education and less jobs available for students upon graduation. Students are more likely to be given loans, which are used to pay for increasingly expensive tuition, and once they graduate they are often unable to find jobs in the fields for which they have studied. In order to make themselves more competitive on the job market, they will often seek more advanced degrees which require additional loans. As such, this growing economic crisis can expect to continue unless fundamental changes are made to the structure and financing of higher education institutions.
The first cause is predatory loan offers that are available for students. The first statistic that should be understood about student loans is that approximately 44 million Americans have some form of student debt (Rothstein and Rouse, 2011). The reason these loans are predatory is because they will often have high interest rates well beyond other types of standard loans, such as loans that might be taken out for purchasing a home. These loans often have high interest rates because students who are in need of such loans do not have established credit. This makes loans more of a risk for banks, but they continue to push them because they know they will more than make up for defaulted loan payments with high interest rates paid by others. As a result, loans are freely given to a vast student population that generally has nowhere else to turn.
The second cause is due to rising tuition costs of many universities, which continue to not only raise standard tuition costs but also increase the size of classrooms, which worsens the type of education that many students receive. Essentially, for many universities, the cost of admission is growing while the quality of education decreases (Houle, 2014). As the quality of education decreases, students are more likely to drop out of college, which leaves them with a loan that has to be repaid and no degree to show for it. Even for those who do receive a quality education, the price of paying for this education creates large amounts of debt upon graduation.
The third cause for the growing student debt crisis is that once students do graduate from college, paid for by college loans, they are finding less jobs available in the market (Houle, 2014). While a few specialized majors such as nursing and business tend to have a high number of available jobs following graduation, many students who study disciplines outside of these fields are finding no jobs available after they graduate. This means that they will often end up working in a field outside of their area of study, often for lower wages, and they face significant debt as a result of student loans during their time in college.
The specific problem of student debt is therefore created by three identifiable causes: predatory student loan offers, increasingly expensive tuition costs, and a lack of available jobs upon graduation that would allow students to pay off their loans. The reason these three causes continue to create this crisis is because higher education does have benefits; while those graduating are finding a lack of jobs available upon completion of their degree, they are still more competitive in the eventual job market than those without a college degree. However, they are often saddled with significant amounts of debt, and their inability to pay off this debt in increasing numbers has the result of making loans have even higher interest rates for others. Until an alternative way can be found for students to achieve higher education without having to endure decades of debt, this problem will continue. If any of the three causes are addressed, however, a small contribution will be made toward lessening this problem overall.
- Houle, J. N. (2014). Disparities in debt: Parents’ socioeconomic resources and young adult student loan debt. Sociology of Education, 87(1), 53-69.
- Rothstein, J., & Rouse, C. E. (2011). Constrained after college: Student loans and early-career occupational choices. Journal of Public Economics, 95(1), 149-163.