Here’s What You Need To Know About The Latest Student Loan Break Extension Smart change: personal finance
Pursuing higher education has been a vital step in realizing the American Dream since James Truslow Adams coined the expression in 1931. He defined the American dream as the hope for “a better, richer and happier life for all of our citizens of all ranks.” Collectively, however, Americans have racked up $ 1.7 trillion in debt just for this step.
The data tells us that, for some, a college diploma is a means to this end. During his life during the same career, a worker with a baccalaureate can earn about $ 1 million more than a worker with a high school diploma as the highest level of education. This income gap increases dramatically with each graduate degree, but with that long-term financial gain comes a price that could take nearly a lifetime to pay.
The current student debt crisis in the United States is inextricably related to legislation, social standards and macroeconomic trends of the last half century. Always, 43 million people in the United States have compromised tens of thousands of dollars in federal student loans for higher income potential down the road.
Decades of tax cuts on state funding for higher education have resulted in higher tuition fees in public and private institutions. Since 2000, the average cost of college studies per student has tripled to $ 35,720 per year. These exorbitant costs exceeded monetary inflation, leading to increased debt and stagnant wages at the time of repayment.
The uplifting accounts of graduates struggling with six-figure debt are often used to contextualize the nearly incomprehensible figure of $ 1.7 trillion. For some, like lawyers, doctors, dentists and veterinarians, these stories and these sums are correct. For the person pursuing an undergraduate degree, however, their total is significantly lower—$ 29,000, on average.
But the burden of repayment is borne differently from one borrower to another. For example, black graduates are five times more likely to default on loan repayment compared to their white peers due to the decline in median incomes. And their total debt is likely to be higher — a on average $ 52,000 for a bachelor’s degree. Women are forced to fund graduate degrees just to close the gender pay gap, ultimately earning – even with a master’s degree – what a man in the same role would earn with a bachelor’s degree. For about 20% of borrowers, funding their pursuit of higher education is not a step towards the American dream, but a roadblock. While various loan forgiveness proposals have been initiated, such as setting aside $ 10,000 for each borrower or deciding on remission-based income thresholds, none have been instituted to date.
On a larger scale, student loan debt can also vary significantly from state to state. Studying Soup analyzed household debt statistics New York Federal Reserve to understand how the average amount of student debt increased in the 50 states.
States are ranked based on the percentage change in per capita student debt between the fourth quarter of 2003 and the fourth quarter of 2020, the most recent period available. The Federal Reserve calculates historical student debt per capita, which means the state’s statistics are calculated based on the total population rather than the number of borrowers. Additional data for 2020 on average debt per borrower is also included.