Could student loan debt cause the next sub prime mortgage crisis in the US? While some analysts think this prediction is alarmist, others believe it is spot on. Whatever your point of view, there’s no denying that, with US student loan debt reaching a record $1.2 trillion, it is a serious problem.
“It’s bad. Student loan debt accounts for 6% of America’s overall national debt, second only to mortgage-related debts. Over the last decade, student debt in the US has tripled, from $364 billion in 2004, to $1.2 trillion today.”
Two thirds of students graduate with some level of debt, with the average individual student loan debt estimated at $30,000. And, Americans are still paying off their student loans well into their 30s, 40s and 50s; approximately two-thirds of student debt is owed by borrowers under 40, 17% by borrowers in their 40s, and 12% by borrowers in their 50s.
Among the various types of household debt, the unremitting rise of student debt is unique. While balances on all other forms of household debt—including mortgages, credit cards, auto loans, and home equity lines of credit—declined during and after the Great Recession, student loan debt has steadily grown, as more and more young people rack up addition debt in late payment fees and interest.
So where is all this money going? The Government issues around 93% of student loans, through the Department of Education. The remaining 7% are private loans. When you are talking in trillions of dollars, this 7% is still a billion dollar business, and a business that is growing, with more and more people forced to access funds for their education through private financial institutions. Many go down this path in desperation, getting themselves further and further into debt once they have reached the Federal loans limit, just to complete their degree.
How does a loan becomes a grant ?
Even more concerning is that while there are strict requirements around assessing the ability of the borrower to repay the loan for private institutions, these requirements do not apply to the federal government. It seems that over $1 trillion has been loaned with little consideration given to repayment ability – the result being that some student loans will simply not be paid back—ever. Default rates are at an all-time high. According to the most recent numbers, one in 10 borrowers default on their student loans within the first two years. Worse yet, it’s not just the graduating students who are faced with massive debt, but in many cases, parents are also taking on loans in a well-meaning effort to support their children’s futures.
So what is fueling these student loans? In part, it is the belief that a college qualification guarantees a good, well paying job. Yet the facts show that this is not always the case. There is not necessarily any correlation between the quality of education, career pathways, and the cost. When it comes to qualifications, the adage of ‘the more you pay, the better it is’, no longer applies. People considering a four-year college degree need to do their research and due diligence, just as they would when purchasing any other type of product or service.
Luckily, there is a myriad of more cost-effective education and career pathways, offering a bevy of respectable, well-compensated, upwardly mobile careers that don’t come with the hefty price tag of a traditional four-year education. These are careers that can be accessed through vocational education, and practical hands-on learning opportunities, such as apprenticeships and traineeships.
Why the lingering social stigma against vocational training?
Unfortunately, vocational education has a history of being seen as less respectable than attending university. But with student loan debt reaching dizzying record highs, and ever-rising unemployment and underemployment rates of college graduates in the US, it’s time for this perception to change.
It’s time to spread the word that skills training, perhaps now more than ever, is possibly the most reliable pathway to an interesting and rewarding career. And, best of all, with skills training, you aren’t saddled with exorbitant student loan debt for years to come. My advice: Invest some time – explore the options.
Original article:
https://www.linkedin.com/pulse/student-loan-debt-college-best-investment-nicholas-wyman
Nicholas Wyman is a speaker and expert on applying real-world solutions to the challenges companies face in finding skilled employees. He is CEO of the Institute for Workplace Skills and Innovation, which develops mentoring programs for corporations and places people in apprenticeship and training programs globally. He has an MBA and has studied at Harvard Business School and the Kennedy School of Government. 
