The Origins and Future of Student Loan Debt Crisis in America

Education is a critical part in society in the current day and age. Many students pursue such important concepts for a brighter future. However, various obstacles exist, which potentially destroy the dreams of many talented scholars. Students dread the aftermath of receiving a good but a very expensive college degree. Therefore, the past few years appeared to be difficult and choice heavy for many individuals. Moreover, the entire system has continued to worsen on an exponential scale, leading many bright people to give up and start hard work without a decent education. The costs of education added with the interest rates is a deadly poison to many wallets and banking accounts. Thus, the issue can be broken down into many relevant phases and consequences. The origins of the issue, an economic stability, and the fairness level along with the problem’s future, are all the stems that ought to be addressed on a serious scale.

The immense issue of huge interest rates on schooling tuition is a very critical and an important subject matter, which appears to be around twenty-five years of age. The suffering student population was stuck between the greedy corporate businesses and a stubborn government, “The change was enacted in 1993, when the U.S. Department of Education expected its new, direct loans would replace many of the guaranteed loans. That hasn't happened because of resistance by Congress to let the government become a direct lender.” (Community College Week). Thus, the politicians refused to grant public loans, which potentially granted a larger freedom to the banks. Therefore, the private organizations were able to set unreal rates on student loans. Finally, a great deal of egoism was demonstrated by the political body that depicted negative impacts on the learning population’s debt. In addition to the limited role of the government in the issue, the lender’s hidden desires to take advantage of certain parties cannot get neglected.

The private sector’s goal is to make profit and oppose any laws that prohibit such action, “By 1998, however, it had become clear that direct lending was not going to replace the guaranteed-loan program. And bankers worried that the impending change in the interest-rate formula would reduce their profits on student loans so significantly that they would have to leave the program.” (Burd). Thereafter, when the government decided to assist with educational expenses, the greed of the lenders started to panic. Without the vest profits from the tuition’s interest rates, the businesses would see a negative shift in their earnings. Furthermore, lobbying attempts were taking place to get the government laws to benefit the private sector. Thus, completely avoiding any moral or ethical standards and beliefs. In the end, the government started to take an active part in loan granting and decreased the interest rates by a significant amount but the issue still holds, due to the fact that the rates are still insanely high. The origins of the problem is necessary in understanding the issue but the effects that would appear if the issue was resolved are important as well.

Cutting down on student loan interest rates will increase the economic growth of the nation and grant more purchase opportunities for consumers. A lower interest rate, leads to more money and less debt, “Heavy debt affects people's spending choices, leading many households, for example, to put off or scale down big-dollar purchases such as car or homes.” (Issues & Controversies). Thus, the decline of tuition interest rate will promote less debt in an average household, which will potentially lead to more money and bigger scale purchases. Bigger and better transactions in an economy will result in a quality dense lifestyle. Furthermore, the heaviness of the loan plus the huge interest rates restrict the rationality of people to make smart and comfortable monetary decisions. While such reasoning depicts the benefits of low interest rates, there exist other evidence of performing such action.

The total amount of student loans scares every individual but many people refuse to account for interest rates, “The total outstanding student loan debt in the U.S. is $1.2 trillion, that’s the second-highest level of consumer debt behind only mortgages.” (Berman). Therefore, many people viewing the statistics make terrible short term decisions. The economy will stop growing if all of a sudden, a number of potential professionals end up quitting on the idea of a higher education. Knowing people will combine the idea of huge loan plus the interest rate and get an unbelievable horrific result. Moreover, the bigger the debt the bigger the interest rates, leading to a closed circle of depression and economic unstability. Lowering the interest rates on student loans will improve the economy growth but also the level of social fairness will improve as well.

The level of fairness between the people and lending organization will skyrocket if the interest rates are decreased on student loans. The variable rates refer to the idea that change to the interest rates is possible, “The difference is simple: the rate on a variable interest rate loan can change over the life of a loan, whereas a fixed rate will remain the same unless you refinance it.” (Setalvad). Thereafter, banks and other organizations use various tricks and loops to force the borrower into the variable interest rate. Thus, granting the power to manipulate the rate in a very dishonest manner. Thereafter, the consequences appear to be very heinous, due to the idea that many students are used to obtain profit. The honesty with interest rates is critical but the private sector needs to be addressed as well.

Private loans are competitive with public, based strongly on the level of interest rates, “Private student loan volume dropped in half in 2008-09, according to the College Board's Trends in Student Aid 2009.” (FinAid). Thus, the private loans became unpopular due to the fact that the lending conditions became unrealistic. When private corporation’s pocess the freedom to manipulate the level of interest rates on loans, than the whole fairness scale shifts dramatically towards the private lenders. All people should benefit from every transaction, but when one party becomes greedy than the entire structure crumbles. The fairness aspect is important in the interest rates of student loan equation but the length of paying term is essential as well. Along with the consequences of distinguishing the issue, there exists a future, where the problem needs to be addressed.

The near future of the student loan interest rate crisis, appears to be full of change and positive influences. Many new laws are being proposed to settle or ease the issue, “Representative Karen Bass (CA-D) has introduced the Student Loan Fairness Act to establish a new “10-10” standard for student loan repayment in which a borrower would be required to make 10 years of payments at 10 percent of their discretionary income, after which their remaining Federal student loan debt would be forgiven.” (Congressional Digest). Therefore, more and more reasonable legislature is being introduced, to finally increase the level of college affordability. Moreover, such economic accomplishments will potentially destroy the one trillion dollar educational debt of America. Thus, the future for scholars seem to be brighter than ever, with the help of the government laws and regulations. Along with lower rates predictions, there seems to be much student loans accommodations planned for the next years.

The terms of tuition loans are scheduled to appear better written and signed, “In his proposal, rates on new loans would vary from year to year, but the rate on a given individual's loan would, unlike in the House bill, stay the same over the loan's life.” (Issues & Controversies). Thereafter, students will pocess less loan condition worrying. The stable rate is definitely a very intellectual idea, due to the fact that any organization is unable to get more money later by changing the terms of the loan. Therefore, many college individuals will see a positive shift in the contractual field. The level of honesty and integrity will become apparent in most organizations because of the missing tricks and word play during the contract signing. Finally, everyone would be satisfied and the transaction would be considered legal and fair.

Overall, the issue of student loan interest rates contains many complexities and legislative dilemmas. However, the only suffering population appears to be the students and their parents. Furthermore, many potential students refuse to attain an education for the simple cost reason. The higher the expenses of a decent campus, the higher the interest rates on the follow up loans. Thus, many, either restrain from attending college or attain a basic degree. Such decisions are hectic, due to the fact that this issue is resolvable. The government along with the private corporations have the money and power to ease the debt and attract more talented people to various careers. Therefore, the problem is simply a socio-economic step which the Americans have to step over.