Student debt has now become a serious issue in the United States.
It’s a common theme: young people attending a 4-year college in the hopes of qualifying for a better job, only to come out with a piece of paper, a job that’s not as high-paying as they thought, and a mountain of debt.
Today, nearly everyone knows, or is someone struggling to overcome the massive weight of student loans. According to the January 2018 Reader’s Digest written by James B. Steele and Lance Williams, the average bill totals at $321,731, while nationwide, nearly 44 million people have school loans – the approximate amount of student debt owed in the U.S. coming to a round $1.4 trillion.
Which begs the question: how did this happen, and where exactly does all that money go? In this two-part series, we’ll answer both – starting with the “how”.
How Student Debt Became So High
It started out innocently – Congress created the Student Loan Marketing Association (“Sallie Mae”) in 1972, with the purpose of buying and federally backing school bank loans to help make higher education possible for students.
When Sallie Mae went private in 1996, however, the door was opened for the company to make a serious profit off of private loans with higher interest rates and less restrictions, on top of continuing to provide federal ones. This resulted in a massive marketing strategy to promote Sallie Mae as the preferred loan provider to colleges nationwide, as well as placing their own employees as loan advisers inside universities and call-centers.
Meanwhile, with less money going back to state governments, many were forced to cut back school funding – thereby causing colleges to upcharge students to make up the difference. The result was a 13% increase in tuition costs over a 30-year period, while annual wages only increased by 6%.
According to the Department of Education, the government holds at least 90% of America’s student debt – all the while raking in up to a 20% profit on each school loan by charging students a higher rate than originally borrowed by the federal government.
As Senator Elizabeth Warren said in February 2016: “The United States government turns young people who are trying to get an education, into profit centers to bring in more revenue for the federal government. This is obscene. The federal government should be helping students get an education, not making profit off their backs.”
(This post was based off of a Reader’s Digest article written by James B. Steele and Lance Williams, issue 12/17 – 1/18. You can read part two at http://bit.ly/2HTHT8Q
