The Looming Student Debt Crisis

Today in the United States two thirds of graduating students leave colleges and universities with student debt. The Institute for College Access and Success began an initiative called “the Project on Student Debt” to estimate just how much student debt has been accumulating over the years. What they found was that the average student will graduate with $26,000 in debt and in more extreme cases, over $100,000 dollars in unpaid loans. These numbers have serious underlying implications, not only for student borrowers and their lenders but rather the entire national economy. With more than a quarter million graduating students every year, the national student debt has amassed to over $1.2 trillion dollars – or about 6 percent of the country’s total debt, and twice the size from 2007. While Americans already struggle to pay credit card and auto loan debts, the national student loan debt is larger than both, second only to mortgage loan debt. Those burdened by unpaid loans aren’t the only ones affected however, business owners, corporations and employees alike will be touched by the stresses a huge debt can put on an economy. As unpaid balances accumulate people will spend less money where they can. Consumer spending drives the economy; without it businesses will profit less, employee wages will be cut and loans will continue to go unpaid.

The looming student debt crisis isn’t very far away, either. In Catie Gutierrez testimony to the StudentDebtCrisis.org, a non-profit geared to make reforms in higher education, she wrote, “I'm 129,000 in federal student loan debt, my first job fall apart after 3 months… I'm afraid I won't have money for a new car, or to pay rent or have a normal life. I imagine myself as an adult baby living with my ...

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...tion fees were raised to help recover some cash that may be lost after tuition cuts. Additionally, NYU’s enrollment rate would increase while its admission rates would decrease, earning them a larger body of students and higher college ranking, which may in turn award NYU more money in donations than ever before.

But perhaps most importantly, by setting a trend for competitive prices in the education market NYU will have secured an invaluable long-term investment; the aggressive quality-based competition seen today suggests that universities and colleges will compete in a similarly aggressive fashion to cut tuition. While enrollment rates across the board will increase, tuition prices will decrease – a trend that will simultaneously provide an opportunity to reverse the student debt crisis, and protect those positive externalities that shape the future day to day.