The $1.6tn US student debt nightmare
It's just it's absolutely crushing a feel like it's ruined by honestly and I've probably sounds no in dramatic but I just I. I don't know how people are supposed to go through life this way. That was Sara who he's one of many individuals in the. US of whom higher education has not Teini failed to deliver on its promise of prosperity but his less than two thousands of dollars worth of debt. I had decided to go to law school. Oh and I got a partial scholarship and it seemed like a good idea. I did well my first year and things were going. Yeah well it seemed like a good prospect in the summer off to head. Fast and mother passed away. She was the closest family member that I heard And it was just a very hard time for me. I ah when your mother dies it just changes your life in a way. That is hard to describe it. Just it just changes things. The school suggested she takes time outs of studying to grieve but not being enrolled in the course meant she was not eligible for financial support. During my time off grieving for my mother I had no income including loans so I was running out of what little the money I am and I felt like I need to do something. I need to go back to school. It back on the financial aid because I was still planning to graduate from law school so so I went back before I felt really ready and I didn't do as well after Democles I had done. I kind of broke down and just wasn't able to do it. And I failed not all of my courses but most of them and the school could me out for academic failure and so everything that I haven't invested in law school thinking that would be a lawyer in the and be able to pay the debt work out so well. Sarah struggled to find a job. I was was not really a prime candidate. Nothing Carney was bad at this time. Too and here was with no recent work experience. I've been in school but I didn't have a degree. Who would want hire me well? Nobody wanted to hire me so unemployed. For a long time saver Sara contacted the loan services and was advised to apply for unemployment deferral which allowed us to suspend payments temporarily but didn't put the loans interest impose. I don't remember exactly what my balance was when I without his kicked out of the school it was. I WANNA say around sixty to seventy thousand dollars and that was two thousand eleven and as twenty eighteen when I refinanced it was hundred. Sixteen two thousand or something like that so it had more than doubled during the time that I was using these unemployment deferrals when Sarah Refinance learned in two thousand eighteen she began to pay off the interest. But it's still in over one hundred fifty thousand dollars worth of debts. Last year federal student debt came to a total of one point six trillion dollars which is eight percent of the country's national income. I'm lizzy work. Ching the personal planets ditch to it and this is the F. T. money show put cost cost. Today's guest is head. Talk to us about her. Recent article the one point six trillion. US student that nightmare. Alice Cantu a reporter on the left digital video team struck a nerve with readers and her article generated hundreds of comments the figures on US student loans a staggering with problems estimated to affect forty five million Americans twenty percent of which earn default having gone at least two hundred seventy days without payment so allies. Can You tell me why Sarah is not unique in the situation. Yeah so Sarah is. One of millions of Americans who've gone to the school and taken a federal loan from the US government not realizing that they would be unable to pay back. There are a lot of people who manage to pay their student at but for people. Oh who don't manage to finish their degrees like Sarah did or who paid all but the last ten thousand dollars of their loans and just can't seem to pay the final amount off student that can be devastating Sarah's case how that grow like that so Sarah was in a case where the plan she put in place before graduating didn't match her situation after graduating she didn't have the income she expected did to pay. The money showed in that case you can defer payments but interest add up. The same thing happens if you pick an income based repayment plan. Basically there are ways to pay less for while if you can't afford the debt but the government system is punitive you will be charged extra extra interest rates for failing to pay on time. So you're paying less money monthly at first. But you're accumulating more debt and quicker could the UK okay face similar situations of mounting student. That tuition has gone up in the UK. But we're nowhere near the American situation. Outstanding outstanding student at the UK amounts to a hundred and twenty one billion pounds. That's a fraction of the. US debt the other thing is that the UK. The government writes off student debts after thirty years. Eighty three percent of students in the UK have not paid back the entire amount of their debt. It doesn't impact their credit. It doesn't impact the government benefits that they receive so I would argue that the UK is not in the same situation as the US. It is true that students feel snowed in by debt and are struggling to pay it off. I think it's important to keep an eye on student in the UK and look for signs of it degenerating but it's not worrying at the moment taking a step back. Can you explain to us why university is so expensive in the. US Yeah so I mean in the UK. It's about nine thousand pounds for one of three years of Bustros Studies in the. US can easily pay twenty to thirty grand a year in tuition alone and a student will need four years. Not just three to get a bachelor's degree so already we're seeing it's way more expensive than in the UK and the reason for that is that well. Most American universities invest in large facilities and campus. That's really expensive. To Upkeep to pay for staff and and then for the more prestigious universities you need to have competitive pay to attract the best teachers and pay for their benefits. Most universities also have research facilities oldies and some of students tuition pays for that. So what's changed then. Why has gone up to that extent? What's changed is that in the past rest the? US government and individual states would contribute to those costs. They would support public universities. And that's along with the case. Federal funding has consistently instantly fallen since the nineteen sixties and it has stagnated since two thousand seven. The same thing happened to states. Funding Universities have increased student student tuition to make up for that gap in funding students. Now have to bear the burden of university costs instead of the government and why we took him out this now. Well student has become a huge problem. It's the largest consumer debt after mortgage debt and about one in ten students is expected to default fault according to conservative estimates so the fact that a lot of former students fill buried under gigantic amounts of debt is a problem and it also means that they spend less they consume less. That's bad for the economy so in this election year. What is the candidates been saying about it? Well L. MR trump's solution has been to try to cut the federal budget further to incentivize students to think twice before taking on debt. He's also promoting shorter degrees on the democratic side. Candidates like Elizabeth Warren and Bernie Sanders have offered to eliminate chunks or all of student debt. Now they would pay for that by raising taxes on the rich so obviously the heat today she lots of people in the comment section of your article joined in the conversation and shared ideas desert on where they think. The problem comes from what to do about it Do you want to read the first comment that we picked short. So this comment comes from Dave's in the wrong room and Davis Sang Vocational qualifications. Are One solution. But they aren't giving the respect. They deserve are from prospective employers as well as society as a whole the student debt problem is alive and well in the UK and set to get worse over next few years. The simple fact is that we can and claim to be meritocratic when the costs of higher education or so prohibitive the next coming comes from a reader who writes under the name Lambert it says as the USA also has an obsession with university degrees as the only route to financial success. Many countries such as Germany and Switzerland have flourishing friendships unshipped and technical studies programs which are key contributors to low unemployment rates and reduced income inequality. Another reader who comments under the name in Yellow Maine says the widespread availability of student loans has simply allowed universities to continually raise tuition fees a respective of their costs. I've over the last thirty years. Tuition has risen by three percent more than the rate of inflation. Why Education is essentially the transfer of information from one set of minds to a larger roger sets in all other sectors information costs plummeted due to massive technological change? If the same that he appeared in addition a very large large proportion of the actual teaching is conducted by at junked. Professors who pay is extremely modest. The whole model of university education in the US is broken and ripe for major disruption perhaps in the form of a greater acceptance have quality online degrees and the delivery of higher education throughout the lifetime of citizens brought brought them crammed into the full years following high school someone under the name. Whatever says financial economist and Professor at Dutch University? Here I can confirm that the Dutch schools are an excellent option for. US students. Most teaching is in English. Many international students tuition well Oh below. US levels with the exception of executive masters and MBA as many professors with us PhD's the majority of my colleagues in fact and teaching quality the same aim as very good us schools. Where I and many of my colleagues used to teach? EG We use the very same textbooks. I also have the occasional American student in my course though not many yet the probably most of them chose our university initially for the city rather than the educational experience so great to have a positive comment there and his another one from someone calling themselves. BEANTOWN beantown says I was heartened to see an advertisement in New Hampshire last week featuring a young woman talking about how glad she was the instead of going to college she went through an electrician apprenticeship program sponsored by the local union and is now making good money honey and high demand career and guess what no student that. Thanks very much alice and a big thank you to all our readers and listeners who regularly comments John Articles or get in touch to share their bs if you'd like to contact me to perhaps suggest an item for a future podcast then you can email us money at mit dot com You can also follow us on twitter for the latest news. Alerts are handled as at F.. T. 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