Should America cancel all student loan debt
United StatesStudents more in debt than ever before
The American Toni Vincent completed her master's degree in public health two years ago. She had to take out a six-figure amount of debt for her studies before she even got her first salary paid:
"When I graduated, I had about $ 100,000 in student loans. 15,000 for my bachelor's degree at a public university, the master's at the prestigious George Washington University cost significantly more at around $ 85,000."
Vincent now works as a program manager for a non-profit organization, coordinating public health projects. Her salary, she says, isn't enough to pay off the loans. After two years in her first job, she's still sitting on a $ 90,000 mountain of debt. She is 31 years old and is at the beginning of her career.
One in ten students never pays back their debts
Like 44 million other Americans on student loans. Together they have accumulated a mountain of debt of around $ 1.3 trillion. That is a record high.
A significant number of them can no longer pay after two years and they default on payment. Constantine Yannelis teaches finance at New York University and specializes in student loan research.
"A lot of students have problems paying off their debts. Of the 44 million students who are in debt, 10 percent never pay back their debts - that's a high rate."
In 90 percent of all cases, the creditor is the state. So the taxpayer steps in for the 10 percent of students who cannot pay their debts. The trend is worrying: In the future, more and more students will be unable to repay their loans. Default rates could increase to 40 percent by 2023. This is based on figures from the renowned Brookings Institute. For years, the media have repeatedly drawn comparisons to the bankruptcy of the investment bank Lehman Brothers and the subsequent financial crisis in 2008. The television channel CNBC speaks of a bubble, Fox News and MarketWatch write of a crisis. The concern: what the mortgages of Americans with bad credit ratings were back then, the student loans could now be. Constantine Yannelis:
"While this debt is a large part of the budget balance sheet, it is still a relatively small part compared to the size of the American economy."
Despite the high costs, studying is worthwhile
In addition: During the crisis in the real estate market, the value of the houses loaned fell. In contrast, however, the students have a financial added value from their studies that does not expire, says Jon Fansmith, director of the American Council on Education. They invest an average of $ 27,000 to $ 33,000 on their degree, but it makes a good return.
"A university degree makes a million dollar difference in income, so the cost of a loan is a good investment."
Having a higher education is currently more important than ever. By 2020, 65 percent of all job vacancies will require at least a bachelor's degree, according to a 2013 study by Georgetown University. For Toni Vincent, it was never an option not to study:
"It was never an issue for me whether I would study or not. This is my investment in my future, and I always assumed that one day I would repay this debt."
American student debts are undoubtedly high. But unlike the real estate crisis, the American economy is benefiting from this because there are more well-paid Americans. For jobs in poorly paid industries, such as Toni Vincent's, President Trump has earmarked $ 350 million in the new budget. If Toni works there for 10 years and pays her installments, she will be released from the remaining debt.
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