Student loan debt crisis a threat to the economy - ABC 33/40 - Birmingham News, Weather, Sports
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Our economy could be in serious trouble again. And this time, student loans are to blame. The average cost of an education at a four year public university is skyrocketing. And the number of students borrowing money has increased as well.
This country has enough student loan debt to stretch one dollar bills from the earth to the moon, and back again 200 times. It exceeds auto loans, and even credit card debt. If something isn't done to fix this, we could see a domino affect.
"For those of us who were not fortunate enough to have someone to pay for our college for us it is a wonderful option to have," said Monica Hill, a graduate student at UAB.
Her college education has come with hefty price.
"For my undergraduate I did have to accumulate student loans," said Hill.
Hill is part of a growing number of college students taking out thousands of dollars in loans. The problem?
"I think the fact that so many borrowers on these students loans are having trouble paying them back is a problem," said Stephen Yoder, assistant professor of business at UAB.
He says there are legitimate reasons to compare the student loan debt crisis to the mortgage crisis a few year ago.
"The two biggest debt that consumers can have today are the debt to buy their house and the debt to finance their education. And unfortunately both of them are underwater. For a student loan, the amount of the loan is more than what they have gotten in value from getting the education," said Yoder.
That translates to bad news for our economy.
"The worst case scenario is that it will depress peoples ability to spend, because, if they are under the weight of their student loans, and their mortgage loans, and their car loans, there's very little left over for disposable spending that keeps the rest of the economy going," he said.
UAB senior, O'Phylia Smiley, says her friends are in that boat.
"They're worried about how they're going to pay other things like how can they get a house or how can they get an apartment if all their money is going somewhere else," said Smiley
So what's the solution? Hill says she has some ideas.
"My idea is additional options for students to have loan forgiveness," she said.
She may be on to something. President Barack Obama announced a few weeks ago that he wants the interest rates on student loans to stay low. One idea in Congress is to modify or forgive the amount of a student's loan if they've shown a willingness and ability to pay the loans back.
Experts say, if you have to borrow, keep some things in minds.
Ask question up front. Look at the monthly amount you'll have to pay once you graduate. It seems like a long ways from now, but it will be here before you know it.
Once you are in repayment, know your options. There are several different repayment plans for students with lower incomes.
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