The outstanding student loan debt as studied over a period of time from 2003 to 2011 showed that there was an approximate increase in the debt by about $650 billion from $250 billion in 2003 to $900 billion in 2011. These figures when compared to the outstanding debt in credit cards, mortgages and auto loans shows that those of the student loan debt has outpaced the growth rates for the other three. This is as shown in the figure below. Figure 1: Outstanding student loans in the US in $trillions Source: Bloomberg, Federal Reserve Bank of New York This subsequent increase in the loan debt for the students in the US can be attributed to the upsurge in the tuition charge, the presence of the government initiatives that have had a significant effect in the education system by encouraging the funding of higher education by the administration such as the Federal Direct Student Loan Program, the tendency by graduates to seek for second degrees in case they fail to secure full time employment and an increase in the number of for-profits proprietary institutions in the US.
Coupled with other reasons, the likely chances are that the figures are deemed to continue rising should appropriate measures fail not to be taken by the government. Purpose of the study This study aimed at providing a concise understanding on the issue of the growth of student loan debt in the US. The achievement of this shall entail a review of the appropriate literature and government statistical abstracts in relation to the growth of student loan debt. Statement of the problem Unemployment is a foremost issue of apprehension for most countries, developed or developing including the United States.
The case of the US has been largely propelled by the instance of escalation in the student loan debt, which has rendered most persons unable to attain financial freedom due to the same. The government’s activities in the education sector also seem to be declining for failure to retrieve the already disbursed funds. This poses to it a great challenge on whether to continue funding the students or stop given the lower payment rate. Currently, it is indistinct what the exact effect of the debt would be but, according to the arguments put forth by analysts, the business and financial market in the US is likely to be affected by this matter. Subsequently, it is quite common to note that the student debt has been dubbed the ‘next sub-prime’ and this is definitely to pose the main question as to whether the student loan debt in the US has the potentiality to cause an analogous expanse of financial damage as was the case with the mortgage crisis.
Durband, Dorothy B, and Sonya L. Britt. Student Financial Literacy: Campus-based Program Development. New York: Springer, 2012. Internet resource.
Stewart, Chuck. Bankrupt Your Student Loans and Other Discharge Strategies: You Can Do It!Bloomington, IN: AuthorHouse, 2009. Print.