“Now, we’re here for one purpose,” said President Barack Obama at last month’s College Opportunity Summit, “We want to make sure more young people have the chance to earn a higher education. And in the 21st century economy, we all understand it’s never been more important.”
The majority of the US, and even the world, would concur with this statement, but new data has shown that for US students who have to borrow money to finance their degree, the return on investment is the lowest it has been for at least a generation.
According to the Federal Reserve Bank of New York, the full-time working wage for the typical US college graduate has risen approximately 1.6 percent over the past 25 years, while the noose of student debt for the recipient of a Bachelor’s degree ballooned by about 163.8 percent, according to figures from the Education Department, analysed by financial aid expert Mark Kantrowitz, economist Brad Hershbein and The Huffington Post.
Data demonstrates that in 1990, the average college student left possessing a debt worth 28.6 percent of their annual earnings. By 2015 however, this figure swelled to almost 74 percent.
According to a HuffPost analysis, by 2023, undergraduate debt for the typical student would exceed the amount paid out for the annual wage if figures progress at a similar rate in the coming 25 years.
Figures also show that seven out of 10 graduates now have to borrow money to fund their education, approximately double the amount who received funding back in the 1990s, meaning that 42million US college graduates now owe more than US$1.3trillion in student loans. Despite the President and First Lady’s rigorous campaign to promote further study in the US, overall, the amount owed to student debt has doubled since Obama came to power.
Dormant wage rates on top of rising graduate debt has sparked concern among policymakers and finance professionals who claim that student debt could be extremely detrimental to the US economy, since households and consumers are forced to rein in spending to make loan repayments viable. One report even argues that the ‘explosion of student debt’ is hindering the young American’s prospects of saving for retirement.
The rising rate of debt paired with stagnant earnings has forced student debtors into distress, as almost 11.6 percent of student loan balances are at least 90 days delinquent, almost double the level recorded in 2003. One in four student loan recipients are either in default or struggling to stay current, according to estimates from the Consumer Financial Protection Bureau.
“With the tools we have in place, particularly income driven repayment plans, we should all be aiming at a zero default rate among student loan borrowers,” Ted Mitchell, US Education Undersecretary, noted last year.
Experts of the sector accuse the Education Department’s loan contractors of performing inadequately, contributing to the student loan crisis currently plaguing the US economy.
“But as the cost of higher education rises and American’s flock to college campuses out of fear they’ll be economically left behind, perhaps it’s time for policymakers to stop declaring that college is worth it and instead redouble their efforts to ensure that student debt doesn’t hold back the economy,” The Huffington Post concludes.
Additional reporting by The Huffington Post.
Image via AP Images.