College loan debt is second only to mortgage debt in the United States today, but it hasn’t always been this way. In fact, most people had never even heard of a student loan in 1980. So what happened to balloon this College loan debt category so big so fast? It’s more complicated than you think.
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States used to fund much of a public college or university's operating budget through taxes.The thinking was that in order to promote the general welfare of the populace it might be a good idea to educate them so they could find jobs and contribute back to the economy. Then economic hard times hit starting in the 1980s and funding was slashed. Today states contribute very little to the operating budgets of most colleges and universities. The cost of college began to creep up, placing the burden on keeping universities running on the students themselves. Tuition has tripled since 1980 by some estimates, while the average family’s income has stayed about the same. So whereas middle class families were easily able to afford college up until the 1970s, today most students graduate with nearly $30k in College loan debt .
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As a result, students report they aren’t able to save money, either for general savings or for retirement. Many are delaying things like purchasing homes and cars, which is having an invisible impact on the economy. But one of the most visible impacts on the economy comes during the holidays. Stores count on holiday shoppers to get their books into the black - hence the term “black friday.” Unfortunately with so much College loan debt more than a third of people who owe loans say they will spend less on the holidays - 61% will spend less on gifts, 39% will spend less on travel, 28% will spend less on charitable donations, and 28% will spend less on holiday gatherings.
College loan debt prevents people from being able to fully participate in the economy, which hurts everyone economically. Instead of spending money servicing student loans that are in default and which may never be paid back, wouldn’t it be a better use of resources to increase the funding to public colleges and universities so students don’t have to support these institutions singlehandedly? There are already some programs in place that will help graduates in certain sectors pay back their loans, but so far those programs aren’t enough to prevent damage to the economy. Learn more about the case for student loan forgiveness from this infographic.