Why does the government give out loans to students?<\/h3>\n
Student loans have a pretty political history. They first hit the scene in 1958 as part of the National Defense Education Act, which was designed to keep the United States from falling behind Russia as the most dominant world power.\u00a0Since the point of these loans was to compete with Russia in the space race, they were mostly available for college degrees like math, science, and foreign languages.<\/p>\n
It\u2019s pretty crazy to think student loans started out to develop defense<\/span>\u00a0efforts, but by 1964, new legislation refocused these loans to create educational opportunities for more Americans.<\/p>\n The easier it became to qualify for a student loan, the more people started going to college. According to the U.S. Census Bureau, only 4.6% of adults had a college degree in 1940. By 2017 that percentage climbed up to 33.4%!\u00a0And, that growing demand for higher education led to increased tuition. By a lot.<\/p>\n Over the last 30 years, the cost of higher education has spiraled out of control. The College Board reports that tuition and fees have tripled, and believe it or not, that\u2019s after<\/span>\u00a0adjusting for inflation. Yes, really\u2026 Investopedia<\/span>\u00a0says education costs have inflated at twice the rate of normal inflation.<\/p>\n Why has this happened? The financial crisis of 2008 led to less government spending on universities, which meant students had to foot more of the bill. Plus, millions\u00a0of Americans who lost jobs in the crisis went back to school to pursue more competitive careers. As the job market became more competitive and colleges had less government money, tuition crept higher and higher.<\/p>\n When tuition increases, the number of loans taken out does too, as do the size of those loans. It\u2019s easy to see how increased tuition boosts demand for loans, but it\u2019s much harder to understand how anyone settled for a system that has left so many Americans with so much debt. \u2018Student Debt Relief,\u2019 a resource that helps borrowers navigate their debt, questions whether or not these loans have helped society at all:<\/p>\n \u201cWhile the U.S Government has made it easier for anyone to attend college with the various student loan programs currently available, they have also helped fuel the rising cost of higher education by lending too easily. That degree that was once sought after and had a great impact on someone’s financial life, is now less valuable due to such a high number of college graduates, yet more expensive to attain.\u201d<\/p>\n University enrollment rates have been declining for the past few years,\u00a0but\u00a0concerns of an impending financial crisis seem to be on the rise.<\/p>\n The Chair of the Federal Reserve has started warning about the way student debt will prevent the economy from growing, and many, many others are raising the \u2018crisis\u2019 flag.<\/p>\n In 2018, 69% of undergraduates took out loans and graduated with an average debt of $29k, according to MSNBC. The numbers climb for students pursuing second and third degrees: \u2018the average debt for medical school graduates is over $190k, and dental school graduates have it even worse with an average debt of more than $285k’ (Nerd Wallet). That\u2019s a lot of people with a lot of debt. But with a competitive degree, how hard will it be for these graduates to pay back their debt? In most cases\u2026 pretty hard.<\/p>\n Once these graduates enter the workforce, they\u2019ll earn salaries that won\u2019t see the same kind of financial growth their parents expected 30 years ago, especially those with only one degree. According to Forbes<\/span>, the cost to attend a university has increased nearly eight times faster than wages have since 1989, so more and more people are failing to pay their loans.<\/p>\n SoFi, an online personal finance company,\u00a0reports that two out of ten borrowers are behind on payments. What\u2019s worse? After 270 days of delayed payment, loans go into default, which means the borrower can\u2019t get tax refunds, federal student aid, or deferments on their loan, which means even less money in their pocket. Plus, their lender can deduct funds directly from their paycheck, and even sue. And as if that wasn\u2019t bad enough, a borrower\u2019s credit will likely be damaged (btw, this will affect a co-signer\u2019s credit too).<\/p>\n With the consequences of unpaid student loans so high, it\u2019s pretty troubling to think that over 10% of borrowers are defaulting.<\/p>\n What about the 90% of borrowers who aren\u2019t defaulting? Well, student debt limits their buying power for pretty much every other cog in the wheel of our economy. According to NBC, student debt is keeping borrowers from buying homes, buying cars, and saving for retirement. All of that has serious consequences for the economy, and if 10% of borrowers don\u2019t have the ability to repay the government at all, things could get pretty desperate.<\/p>\n What makes the student debt situation even worse is how hard it is to be relieved of loans. While declaring bankruptcy will get rid of many kinds of debt, student loans won\u2019t be written off in bankruptcy proceedings. That means someone could lose their job, lose their home, and still be legally required to make monthly payments on their student debt.<\/p>\n \u2018Investopedia\u2019 reports that bankruptcy lawyers are arguing student debt should be discharged in a bankruptcy filing, but is that really the best solution we can offer borrowers?<\/p>\n It looks like both sides of the aisle are getting serious about student debt and how it impacts the economy. Last month, the House Financial Services Committee held the first of many hearings on student lending, where advocates across the political spectrum criticized how difficult it is for borrowers to understand the terms of their loan and options for refinancing.<\/p>\n With the 2020 elections right around the corner, what comes next for the student debt crisis is undecided, but it may be a relief to know that everyone views this as a problem, and consumer protections are becoming a more important part of political discourse on student debt.<\/p>\n Student loans are the fastest-growing kind of debt in the US, and, according to Bloomberg, they also have the highest delinquency rate of all household debt (including mortgages, credit cards, and car loans).<\/p>\n Oddly enough, Russia and student loans are both common topics in political debates, but these days they have little to do with one another. So what can we do about student debt while the state department confronts Russian interference?<\/p>\n That magical four-letter word you keep hearing is important in solving the student debt crisis: VOTE! The issue of student debt is creeping into center stage, so make sure your voice is heard in deciding who will control the next chapter in the student debt saga.<\/p>\n So can you adult with student debt? Despite the confusing paperwork, hold music, and policy manipulation student loan servicers may throw at you, you have the ability to manage your student debt.<\/p>\n Increased political attention is a start, and advocates, like former Consumer Financial Protection Bureau Student Loan Ombudsman Seth Frotman, are working to make student loans more consumer-friendly. While it may not help those of us who\u2019ve already taken out loans, companies like Frank<\/span><\/a>, a super fast and free FAFSA tool with premium membership add-ons, are using tech to make student loans easier to understand and obtain.<\/p>\n There\u2019s no sugarcoating the desperate state of the student debt crisis, but there\u2019s good reason to be hopeful about the future of student loans. If you want to take a deeper (and funny\/depressing) dive into the student debt crisis, you can watch Hassan Minaj\u2019s take in this clip<\/a><\/span>\u00a0from his show Patriot Act. If you want to feel hopeful about your financial future, check out our article about millennials buying homes<\/a><\/span>.<\/p>\n","protected":false},"excerpt":{"rendered":" In the past 30 years, tuition and fees have tripled, and believe it or not, that\u2019s after adjusting for inflation.<\/p>\n","protected":false},"author":20,"featured_media":7496,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"puppies_section":[],"class_list":{"0":"post-7478","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-lifehacks","8":"post-hentry"},"acf":[],"yoast_head":"\n![\"high-tuition-debt-lemonade-blog\"](\"https:\/\/lemonade.com\/blog\/wp-content\/uploads\/2019\/10\/img-01.png\")
<\/p>\nHow has tuition impacted student loans?<\/h3>\n
Is student debt a national financial crisis?<\/h3>\n
![\"student-loan-default-lemonade-blog\"](\"https:\/\/lemonade.com\/blog\/wp-content\/uploads\/2019\/10\/img-03.png\")
<\/p>\nStudent debt and consumer protection<\/h3>\n
What can I do about the student debt crisis?<\/h3>\n
![\"debt-increase-lemonade-blog\"](\"https:\/\/lemonade.com\/blog\/wp-content\/uploads\/2019\/10\/img-02.png\")
<\/p>\n