Navigating the Student Loan Debt Crisis

According to the Federal Reserve, student loan debt has grown almost 157% since 2011, making it the second largest consumer debt segment in the United States next to home mortgages. Currently, student loan debt in the U.S. lays around $1.5 trillion and shows no signs of slowing down anytime soon.

But WHY is student loan debt so high?

The obvious answer as to why student loan debt continues to increase is because of the rapid growth in college tuition. Over the last 10 years, the rate at which college tuition has increased is about 5%, which is well over the rate of inflation and the average increase in personal income. Not only are tuition costs rising, but the cost to borrow loans is too, making it much more challenging for students to repay what they already owe.

Bloomberg reports that student loan debt also faces the highest 90+ day delinquency rate compared to any other loan. One would assume, the more debt a person has, the harder the repayment is, but in fact the opposite holds true. Research shows that loan defaults are highest among those with the smallest balances, suggesting that students who start classes and don’t finish are the ones who cannot afford to pay back their loans (and not completing their degrees because of the high cost to begin with). The delinquency rate will continue to rise among those students who don’t complete their degrees, or those who graduate with degrees that don’t hold the necessary cost of return, thus making student loan debt an even bigger issue.

So HOW can the student loan debt crisis be solved?

To begin to solve the student loan debt crisis, student debt needs to be viewed as a last resort and not the first option when paying for college. Parents can start to assist their children at an early age by opening a 529 savings plan or research other investment opportunities. For those who are about to enter college and don’t possess the financial means, finding a less expensive option, such attending a community college or taking online classes before moving onto a traditional 4-year college will help cut student loan costs.

Employers can also help those who may be seeking a degree by offering their employees an affordable way of attending college. In conjunction with select, regionally-accredited, non-profit education partners, College Gateway for America has developed an innovative, low-cost employee benefit and management training program designed to improve hiring efficiency, reduce employee turnover and lower recruiting and training costs.

It’s no question – having the option of a debt-free college degree is a win-win for both the employee and employer and help begin to resolve the student loan debt crisis. Click here for more information about this program.