Open the page of the official website of the U.S. government education aid, and a sentence came into view, “You are the smartest investment in the United States.”
Next to this sentence is the interface for logging in to view the amount of aid, and it is in the interface of amount of aid that hides the nightmare of many American youths. This nightmare began with the American youth filling out the FAFSA application form for financial aid. As of the end of 2020, about 45 million people in the United States have more or less student loans.
In 2019, the host of the Netflix talk show Hassan Minhajie ridiculed the student loans on the show, causing the audience to burst into laughter. But Minhajie then solemnly informed the audience that the U.S. Department of Education has become the nation’s largest financial institution in the field of lending by virtue of student loans . Upon hearing this news, the audience fell silent immediately.
As of the end of 2020, the total amount of US student loans has reached 1.7 trillion US dollars, accounting for about 8% of the national GDP, of which about 1.57 trillion US dollars came from the US Department of Education.
There is a joke in the United States: The Department of Education is the largest commercial bank in the United States. This is not exactly a joke: one of the original meanings of American student loans was to increase revenue for the Ministry of Education.
However, with the economic downturn, rising tuition fees, and difficulties in finding jobs, not only did the Ministry of Education’s dream of increasing income vanish, but American youth were also forced to the edge of a cliff.
1. Increased tuition fees
In the early 1990s, college tuition expenditures accounted for only about 6% of the median household income in the United States. In 2014, this number was close to 16%. In other words, a family in the United States needs to spend about one-sixth of the total income in order to afford a college student.
After the 2008 financial crisis, the fiscal revenues of the states in the United States dropped sharply, which led to a decrease in public service expenditures and a rise in public university tuition.
According to statistics from the U.S. Department of Education, in the 2019 academic year, people who choose to study in public institutions of higher learning accounted for 73.13% of all college students. According to CNBC reports, in the 10 years from 2008 to 2018, public university tuition has increased from US$16,500 to US$21,400 (approximately RMB 140,000) per year , an increase of 29.8%.
Tuition fees for private colleges have also risen from an average of 38,700 U.S. dollars to 48,500 U.S. dollars (approximately RMB 310,000) each year , an increase of 25.3%.
Tuition fees have been rising year by year, but the number of enrollment has not decreased as a result. According to a report by the Center for Budget and Policy Priorities (CBPP), a US think tank , enrollment increased by 8.0% from the 2008 to 2016 academic year.
The reason is that going to college can theoretically bring about a “better” life.
The Brookings Institution research pointed out that the unemployment rate of workers with a college degree is lower. In addition, compared to workers with only a high school degree, even a two-year associate degree can increase the total income of the worker by about 360,000 US dollars; and the bachelor’s degree can increase the total income by about 1 million US dollars.
With a good vision for post-graduation, more people have entered university. They also chose student loans because they could not afford the high tuition fees.
But after graduating from university, some people may have stepped into the beautiful, but some people have fallen into the abyss.
James Cova, a former policy adviser to the White House, said: “For many students, student loans have become an insurmountable obstacle in a good life. They abide by the rules, study hard, work… and then they are burdened with unaffordable assistance. Study loans.”
Caitlin Harper received a bachelor’s degree in 2013 at the cost of a $140,000 (about 910,000 yuan) student loan. The monthly repayment is about 1100 US dollars (about 7100 yuan) for 25 years. Including interest, the total repayment is more than US$300,000 (approximately RMB 1.95 million) .
“To me, this sounds like a news story.” Caitlin said.
CBS Radio once evaluated the US student loan system as “financial terrorism.” This kind of “terror” comes from Ligunli: the interest generated by the student grant loan will also calculate the interest.
At present, the interest rate of federal student grant loans is generally linked to the yield of 10-year U.S. Treasury bonds. Although in the past few decades, the yield of 10-year US Treasury bonds has been falling. But to this day, the average interest rate of federal student loans for undergraduates still fluctuates between 2.75% and 5.30%, and the interest rates for private student loans range from 3.34% to 12.99%. The interest rate for graduate student loans is higher than that of undergraduates. To be higher.
Higher education expert Mark Kantrowitz mentioned that the current student loan interest rate of 2.75% is “the fourth lowest interest rate in the past ten years.” The federal direct lending rate will rise from 2.75% to 3.73%. It can be said that the burden of American college graduates will continue unabated in the foreseeable future.
TikTok user Holly Polly (@swankysquirrel1) was also caught up in the ” returning” . Because she was enrolled in law school, Polly borrowed $80,000 in student loans at an annual interest rate of 7%. After graduating, Polly worked in one of the high-paying industries in the United States: lawyers. In the next 10 years, she repaid a total of $120,000, but after opening the student loan account, she found that she still owed $76,000. She yelled in the TikTok video, “The student loan is a mess.”
In Holly’s video comment area, many users accused Holly of self-reflection when she encountered student loan difficulties. But a “net celebrity” named Vivian expressed support for Holly. Vivienne said in an interview with refinery29, “This is a structural issue.”
Vivian herself received a master’s degree in 2010 and owes about 80,000 US dollars (approximately 520,000 yuan) in student loans. “Now (2021) , I owe 124,000 U.S. dollars…I have been repaying for nearly seven years.”
Data from the U.S. Census Bureau shows that the median income of workers in the United States in 2019 was $41,500. However, after adjusting for inflation by the St. Louis Fed, it was only 35,997 U.S. dollars (approximately 230,000 yuan) in 2019 , and it was 31,684 U.S. dollars in 1999. In the past 20 years, the increase was only 13.5%.
Under the pressure of not-low student loan interest rates and rising tuition fees, the increase in wages is negligible.
Calculated by the above situation of Caitlin, assuming Caitlin can get a median income: about 36,000 US dollars per year, 3,000 US dollars per month. She needs to repay a student loan of US$1,100 and pay a rent of US$950, leaving only US$950 as daily expenses, which is an average of US$31.7 (about 205 yuan) per day .
According to BLS consumption data in 2017, in addition to rent, American citizens of all ages spend an average of US$131.96 (approximately RMB 860) per day .
As a college graduate, Caitlin’s average daily expenditure is less than a quarter of the average.
3. “Good business”
In an ideal state, student loans were once considered by federal budget officials as a means of “income-increasing”: students pay tuition through student loans, and the Federal Ministry of Education uses taxpayers’ money to earn interest to increase fiscal revenue. But the actual situation is that graduates are overwhelmed by the pressure of school loans and hovering on the edge of the cliff all the year round. The Ministry of Finance has steadily increased due to bad debts, and actual expenditures have continued to increase.
All student loans issued by the US Department of Education come from taxes paid by taxpayers. In other words, the Ministry of Education does not need to spend costs to obtain funds like commercial banks, in order to obtain interest rate income of 2.75% to 5.30%. No matter how you look at it, this is all a “good business”.
However, the excessive burden for graduates has not only frustrated the Ministry of Education’s “make money” calculations, but has also made graduates worry about the cliffs all the year round.
According to the Pew Charitable Trust citing a report from the U.S. Department of Education, as of December 2019, about 20% (nearly 9 million) of the 43 million U.S. student loan holders had defaulted.
According to the calculations of the Brookings Institution, such a default rate will cause the Ministry of Education to spend $307 billion on taxpayers each year, and does not include the expected amount of bad debts in all student loans issued before 2019. Instead of the $31 billion claimed by federal budget officials.
The high default rate not only makes the “good business” of the Ministry of Education worse, it also overwhelms the students.
4. Times have changed
Nick (pseudonym) graduated from the University of Illinois at Chicago (UIC ) 8 years ago with a bachelor of arts degree. UIC is a public university. As a native of Chicago, Nick enjoys the best tuition fees.
However, after graduating from university for many years, Nick still lives in the concierge of a building. Every once in a while, there was a letter addressed to him lying at the door. These letters are all Nick’s student loan bills.
Every time Nick goes out and passes by a federal letter with his name on it, he usually lifts his foot and walks directly over it, without reading it.
Nick’s family didn’t expect him to repay his school loan. Nick’s uncle told Times Weekly that he didn’t need a school loan when he was in college (in the 1980s) because he had enough scholarships. Back then, the US government’s grants for grants were far more generous than it is now.
According to a report by the U.S. Department of Education, in the 1960s, the federal student loan interest rate was 6%, and once reached 10% from 1988 to 1992. But college students at that time didn’t have to rely on student loans.
Since the early 1960s, the proportion of grants in the form of scholarships and other forms of subsidies has decreased year by year, from about 45% in the 1960s to less than 20% in the 1990s. In the 1970s, when Pell’s bursary was established, it once accounted for about 50% of the total bursary. But federal funding has declined since the Reagan era, and only accounted for 20% in the early 1990s, close to the level of the 1960s.
At the same time, the granting of student loans rose from 10% of the grants in the 1960s to 60% in the early 1990s.
During the 2008-2016 academic year, although the total amount of the Pell Grant, the main federal scholarship, increased by 68%, it was still difficult to offset the increase in tuition fees and the increase in the number of applicants. Compared with the growth rate of student grants, federal student loan grants have become more generous.
When a Times Weekly reporter asked whether he would still consider continuing to go to school if he had to rely on student loans to go to university, Nick’s uncle said, “Maybe.”
In the last school year, Nick’s uncle dropped out of school due to financial reasons.
5. The Abyss of Default
According to US public television reports, the group with the highest default rate of student loans is the group with the least amount of borrowing (less than US$10,000) . Because most of them are dropouts, they become low-income groups after leaving school.
In the United States, the consequences of breach of contract are very serious. First, the credit score of the defaulter will fall to the bottom. Second, the creditor has the right to detain the wages of the defaulter. In addition, the professional reputation of the defaulter has been hit. If there is a professional license, it may face cancellation.
In the United States, credit scores not only determine whether a person can apply for mortgages and car loans in the future and the degree of preferential loan interest rates, it also means whether a person is honest and trustworthy. Maintaining a good credit score plays an important role in daily life such as renting a house and buying a house.
After 2008, “How much credit do you score?” has even become the opening remarks of American men and women on blind dates. Therefore, almost everyone will do their best to avoid a decline in credit score.
Noel De Wright, a resident of Nebraska, even struggled with this.
In 2008, affected by the financial crisis, most companies struggled hard. In this unfriendly year for graduates, Noelle graduated with a Bachelor of Fine Arts (BFA) . In desperation, she went back to school for another year, just to get a better employment degree in English.
After graduation, in addition to holding a double undergraduate degree, Noelle has a $110,000 student loan. Only 27,000 of the 110,000 li came from the federal government, and the remaining 83,000 came from a private loan signed by Noelle and her mother. As mentioned above, personal loans mean high interest rates.
After graduation, Noelle could only work as a social worker in a non-profit organization temporarily, barely making ends meet. I also tried to send out hundreds of resumes in search of a higher salary, but found nothing in the end.
It was a burrito that crushed Noelle in the end.
One day in May 2012, Noelle tried to pay for the burritos she bought with a credit card in a supermarket, but she found that she could not settle the bill. To repay her school loan, her life was stretched, and her $4,200 credit card had already been maxed out.
Noelle thought of suicide several times. In addition, Innoelle was unable to repay the student loan, and her mother also faced the penalty of deducting credits due to the fact that she had signed the contract at the time.
In the end, she owed about 142,000 US dollars in private loans, plus 27,000 federal government loans, for a total of 169,000 US dollars.
Judith Luiz, who studied radio journalism, graduated in 2010 with a $80,000 loan. She is now 30 years old and still lives with her mother. She failed to repay the student loan in time because she had not found a job for half a year after graduating, which triggered her first default. In 2014, she defaulted again-twice in four years.
Luiz told the Times reporter that most of her friends are in the same situation as her: defaulting on their school loans, being stretched, and living with their parents.
An alumnus of Luiz told the Times reporter that he once dropped out of school because he found out that he could not repay the loan. After working as a courier for a year, he chose to return to campus. But he complained: “The help of the courses taught is equal to 0.”
Many American students were only 18 years old when they filled out the student loan form, and they did not understand what it meant to take on the student loan . They have never calculated the return on investment ratio, nor can they know whether their education investment is worthwhile.
6. “Good investment”
Amanda Spitzri, who graduated in 2017, has a $90,000 student loan for her degree. She is eager to promote criminal justice reform. After graduation, with the expensive paper of a bachelor degree, she hopes to find a job related to justice.
But in the end, in order to repay the loan as soon as possible, Amanda can only work as a restaurant waiter, barista, and helping people walk their dogs. “I mistakenly thought that student loans could help me find my dreams, but in fact it prevented me from pursuing my dreams.”
Looking back on the student loans she was carrying, Amanda said that under the exaggeration of the society’s “good investment and good debt” for student loans, “student loans have become the only way to ensure the completion of their studies and lead to success. Student loans are used. People think about the idea of a better life.”
A Times Weekly reporter contacted Amanda, who is still a waiter in a restaurant north of Chicago.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/young-people-with-a-300000-student-loan-upon-graduation-are-the-smartest-investment-in-the-united-states/
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