By Mr. Ajay Sharma, President and Founder, Abhinav Immigration Services
A post-secondary loan for education is one of a students most crucial investments for their future. Perusing higher education abroad leads to higher expenditure and a lower risk of future unemployment. But it takes work for middle-income-level families as the opportunity to study abroad at such whopping costs continues to slip out of reach.
Over the past decade, the average tuition fee at a foreign university has more than tripled, while a family’s income has barely increased. More and more international students from lower or middle-income groups rely on education loans to pay their fees. While most students can pay back their loans, a section of students still feel burdened by debt, especially those who have a family to take care of, want to set up their business or do not have sufficient means of earning to repay the debt. Moreover, some students don’t have access to enough information on the earnings potential of a particular program and future economic conditions regarding a specific study domain that hampers their earnings as soon as they enter the labor market.
The high returns to a college degree make loan repayments affordable for most borrowers for students. However, some student borrowers need help to repay the debt, specifically those in the initial stages of their careers when earnings are relatively low or are still searching for jobs. It is prevalent that most college students earn well in the later stages of their careers, mainly between 25 and 30 years. The earning potential increases by the time they reach 45. However, the typical loan repayment period starts when a student completes their studies, irrespective of whether their earning allows them. Since the benefits of higher education accrue later, it is the responsibility of higher authorities to make college more affordable by making loan repayment manageable to repay later.
What are the consequences of the student-debt crisis?
- Student debt impacts the short-term financial stability of borrowers.
- Student-debt acts as a roadblock to a country’s economic growth.
- It affects career goals and personal life decisions.
- Student Debt creates a Racial Wealth Gap among individuals.
- Student debt poses a more significant threat to the broader economic goals of a country.
What are the possible solutions?
Student debt balances are skyrocketing, disrupting the financial security of millions of student borrowers. In the last decade, outstanding student debt has grown astonishingly to
$1.5 trillion. Student debt undoubtedly severely impacts the personal and professional life of
borrowers and the entire economy. It is also posing a burden on individuals, families, and communities.
So, how can countries solve the student-debt crisis? Let’s discuss that in detail:
To start with, solving the crisis requires possible solutions from a range of stakeholders and
authorities- who have the power to act immediately.
- Postsecondary education must be made more affordable, accessible, and equitable for students regarding both costs and benefits.
- Solutions must target reducing the financial burden and hardship of students. They must also ensure the well-being of people who cannot afford higher debts.
- Paying out of one’s pocket is a sad reality for many student borrowers, particularly low-income ones. Reducing the cost of attendance, including tuition fees, transportation, loan, and other miscellaneous expenses, will automatically reduce the need to borrow and minimize the debt burden on students.
- Help student borrowers understand their repayment options and legal protections, and help them understand how they can avoid taking more debt than necessary.
- Provide students with more need-based aid and grant funding to offset the cost of attendance and minimize the debt burdens students take on in attending postsecondary programs. Structure Grant programs in a way to target/support specific demographics of students.
- Offer more financial aid or funding to students with dependents. In 2019, the State of California offered generous assistance of $96.7 million for students with dependents.
- Free college programs can also dramatically reduce education costs and living expenses. Providing free college programs cover costs beyond tuition fee, making it easier for students from low-income backgrounds to actively participate in study programs without incurring additional costs.
- Governments can also introduce state programs that help borrowers repay their loans while building other assets, such as subsidising homeownership.