One of the most important issues that currently face the financial markets is student debts. Many people hope to realize their life long goals of completing college, university, or professional studies, but are not able to afford it. Furthering your education will not only help you to be more successful in life, but it will also give you a deeper understanding of many aspects of life. “The decision as to whether to invest in one’s human capital in the form of education requires that an individual compare the present discounted value of benefits—among which are the gains in future earnings as a result of education-to the present discounted value of costs, including tuition, fees, and foregone wages” (Avery and Turner). The majority of people who have gone on to further their studies is phenomenal, even more so, is the majority who have had to do it without financial assistance of any form. Scholarships can guarantee that people get the assistance that they need to meet their expenses while they are in school. It is shocking to know how many have opted for student loans as a way to fund their education, with the aim of repaying it upon completion of their degrees. What is more astounding, is the majority of individuals who, for whatever reasons are unable to repay the debt. Unemployment, emergencies, inability to pay or just failing to repay are some of the reasons that people use to default on their college debt. The importance of repaying student loans are not stressed enough, but it can range from other students’ inability to access loans to having a bad financial record that is carried forward throughout the borrower’s life. Student loans are structured loans that are made available to those who are unable to fund their education. Accessing these loans are based on an eligibility criteria. In addition to being eligible, there is also the ability to repay after graduation if the student has marketable skills. Many don’t end up repaying their loans, even with marketable skills and the means to do so. It will never be clear why this is so, but it is getting even more prevalent and affecting others who would gladly repay their loans. The total amount of student loan debt increased to over 800b in 2010, which surpassed the outstanding amount of credit card bills (Avery and Turner). Taking a loan to finance educational goals has slowly increased over the years. The magnitude of the figures that depict outstanding student loans has seen many studies being done into the causes and effects of this outstanding debt. This is true for some sections of the society. “The total students from disadvantaged backgrounds, such as low-income families, as well as Black and Hispanic students, are more likely to face excessive educational debt burdens after college” (Jackson and Reynolds). The debt of student loans have a ripple effect, it affects not only the institution that financed the loan, but also the economy as a whole. Studies have been concluded that showed the low incidence of borrowers to start a business of their own. This, in itself would be a boost to the economy if the reverse were true and they were to start small businesses. The borrowers’ capacity for debt is not an extensive one, so the correlation would make a lot of sense. The inability to repay a debt can have long lasting effects, as well as impact the borrower’s ability to raise much-needed capital to start a business. Delinquency also impacts the ability to create jobs for this same reason. It can affect home-ownership, career choices and even the ability to gain employment in some circles. Many borrowers face certain realities that enable them to make difficult choices about their debt and this has seriously impacted the economy. According to Hank Johnson “The rising costs of higher education coupled with the stress of paying student loans are putting increasing pressure on students.” this holds true for most of the students who are forced to take student loans because of insufficient funds to pay for their education, boarding, books and even transportation. Not every student has the ability to fund even some aspect of their education. Even with the help of parents and other benefactors, it can be difficult to find money to pay for everything that is needed for one’s education. After taking on this exorbitant cost to ensure that one receive the education that one need, it is still no guarantee that there will be a job for that individual. Worse still, is the inability to find a job that affords them the opportunity to repay a loan and actually survive with the rising cost of everyday expenses. Many are subjected to taking jobs that are below their level of education and this has posed a real problem for them. With the current economy, it is highly unlikely that even 60% of graduates will be able to get the job of their dreams, or even one that can adequately provide for them (Publications.nasfaa.org). Taking on additional jobs will not afford them the opportunity to repay their loans. Some have had to postpone their monthly payments to facilitate other expenses, but this only results in added interest and penalty for the individual. Many times, serious sacrifices have had to be made to facilitate the timely and accurate repayment for some borrowers. the options that are available to borrowers are varied. One is able to consolidate, extend, choose the Pay As You Earn option or any other option that is available, to end their dilemma and restore their credit. Financial institutions will also work with their clients to come to an amicable solution, where their debt is concerned. The aim is to reduce this unwanted giant debt in the economy and give back the benefits to others who are also in dire need of this assistance.
Avery, Christopher, and Sarah Turner. 'Student Loans: Do College Students Borrow Too Much - Or Not Enough?'. Journal of Economic Perspectives 26.1 (2014): 165-192. Web. 3 Nov. 2014.
Jackson, Brandon A., and John R. Reynolds. 'The Price Of Opportunity: Race, Student Loan Debt, And College Achievement'. Sociological Inquiry 83.3 (2013): 335-368. Web.
Publications.nasfaa.org,. '"The Effect Of Educational Debt On Career Choice" By Yeseul Choi'. N.p., 2014. Web. 4 Nov. 2014.