When it comes to the student debt crisis, emotions usually take the lead when discussing the probable solutions to resolving a multi-trillion-dollar cloud enveloping the United States. Young people, being millennials and members of Generation Z, will be faced with a financial crisis that is purely unique to the societal and cultural importance of college education.
Though we can spend our time debating the merits of a college degree in our current economic snapshot, the more trying matter at hand is the impending burst of the student loan debt bubble.
Mark Cuban, in a 2015 interview with Business Insider, said that the student loan crisis and the ever-increasing rate of college tuition will come to a head in little to no time. The billionaire owner of the Dallas Mavericks predicted this a few years, yes; however, the current state of the debt crisis—especially under the tenure of the Trump Administration—has reached a critical state. "At some point, it’s going to pop," Cuban said in the interview. And, in our current state of affairs, he isn’t too far off, as I’ve mentioned above.
During my morning coffee the other day, I noticed that colleagues of mine at the St. Louis Post-Dispatch sent a link to my email. It was a new special report the newspaper just released from Credit Sesame tracking the average rates for student loan debt in each of the fifty U.S. states.
For example, the special report, entitled “States with the Most Student Loan Debt” revealed that the price tag for the nation’s overall student debt landed at $1.38 trillion—up 152% over the past 10 years. This number is also the highest on record, so far, compared to past years.
Student loan debt, according to the report, is now the largest source of combined household income out, beating auto loans and credit card debt.
By state, the numbers aren’t super encouraging either. Credit Sesame sourced their analysis from data obtained from the Federal Reserve Bank of New York and overall earnings data from the U.S. Census Bureau’s American Community Survey.
Regardless, failing to heed the warnings of figures like Cuban (who predicted a student loan bubble burst for years) and leading economists will result in financial turmoil on every aspect of the American economy. This calamity and danger can be immediate or slow; but, the fears of an economically catastrophic event linked to student debt.
Consider the words of economist Joseph Hogue. He told the Student Loan Hero website that “student loans have a huge effect on the largest demographic population in the United States.” The only way to resolve such a crisis, according to Hogue, is the younger generations, the class of people who are required to keep the economy going.
It isn’t helpful that student debt growth outpaces overall income growth nationwide. In one study from the U.S. Department of Education, median debt and median wages are due to intercept within the coming years. Once that happens, any work conducted to reduce and manage debt from educational costs could render entry-level income earners with more challenging overall financial burdens.
Doomsaying and predicting what’s going to happen can be done day to day; but, the failures of the past several presidential administrations and Congresses leave younger generations with the requirements to fix this crisis have made student loan debt the issue of the day.
Ironically, the only proposed plans that have ever made any impact or gained public support—either Education Department regulatory guidance, legislation, “free” tuition assistance programs, or simply political campaign promises—are still too costly to support.
Sadly, we’re left a dilemma where debt-crippled college grads weigh the cost and benefits of paying, defaulting, and/or holding out until there’s “debt relief.” Either way, when the bubble bursts, it’s going to hurt the entire economy.