It’s absolutely criminal how much universities cost these days. According to NerdWallet, the average U.S. household has more than $47,000 in student loan debt, totaling a staggering $1.7 trillion in 2020. That’s more than the top 20 richest people in the world’s net worth combined. Join David Grasso of Bold TV as he discusses student loan debt and what you need to know going into 2021.
What to expect in 2021
Many people have both federal and private student loans. However, since the start of the pandemic, federal as well as some private lenders have given borrowers a break from paying back their loans. Unfortunately, repayments are scheduled to restart in January 2021, again enforcing borrowers to pay back their loans despite the continuing hard economic times. David explains that continuing to extend the student loan forbearance should be a topic lawmakers are willing to discuss when talking about other financial issues during the pandemic such as unemployment assistance. Even though the light at the end of the tunnel is near, with the vaccines starting to ship out, there is still little sign of life going back to normal in the next few months.
Why are we in this mess?
There are many reasons why tuition has shot up in the last few decades. One theory (the Bennett hypothesis) suggests that it is actually financial aid that increases tuition prices. The government never placed a limit on how much money they were willing to give to students. Knowing that, universities took advantage by raising fees knowing that students would be getting all the help they need to afford the tuition. The Federal Reserve Bank of New York said that for every new dollar of federal student aid, tuition is raised by 60 cents.
What can be done?
Does that mean we should stop giving out financial aid altogether? Not exactly. The damage already has been done, and we are at the point of no return. The consequences of these actions have forced students to depend too much on financial aid. One possible solution is to finally put a limit on how much financial aid the government is willing to give out. As a result, academic institutions would be forced to keep tuition at a certain price.
Too little, too late
People also are talking about forgiving student loans altogether. OK, then what? The universities are still the same price, and new students applying would have to take out new loans. In addition, the debt is $1.7 trillion if you forgot. It’s not so simple to just make that disappear. Something could have been done decades ago when the debt wasn’t so high. Unfortunately today, it’s a little too late to do anything so dramatically. At this point, the best thing we can do is change the system by holding these financial aid services and academic institutions accountable.