How The Trillion Dollar Student Loan Crisis Will Affect Everyone

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The Trillion Dollar Student Loan Crisis continues to grow, causing political and personal strife across the country.

The student debt crisis passed a major milestone reaching 1 trillion dollars in 2012 according to the WSJ and New York Federal Reserve.

But what does 1 trillion dollars in student debt mean for you? Is it a new sub-prime equivalent bubble or is it just a reflection of the need for people to be more educated in today’s economy?

Student Debt Doesn’t Just Affect Students

By most estimates, 1 in 5 American households are now living with student debt. The Chronicle of Higher Education puts the percentage of new students who attend college at approximately 20 million per year, and of those about 12 million take out student loans of some sort to help cover the cost.

In 1989 the average debt a college student held was $9,634, by 2012 it came to $26,682, and the most recent numbers are expected to be even more staggering. Student debt actually surpassed credit-card debt in 2012, with an average of 5% of household income going towards educational expenses.

That’s a lot of money consumers aren’t able to spend elsewhere.

What Can Be Done About It?

There’s really no easy answer to the student loan problem, someone at some point has to foot the bill. The government is obviously aware of the problem and has several programs to attempt to address the problem through student loan forgiveness programs.

However, these programs may not be enough. U.S. Rep. Hansen Clarke (D-Mich.) has proposed a bill called the Student Loan Forgiveness Act of 2012, which would forgive student loan debt for students who’ve paid at least 10% of their discretionary income towards their loans for at least 10 years, with some stipulations. As currently proposed, it would have a cap of $45,520 of forgiveness on the principals, fees and accrued interest for loans taken on or after the date of enactment, while there would be no cap for loans which predate the enactment.

Supporters say that it would inject much needed consumer funds back into the economy and free thousands of indebted students and graduates from crushing debt. Opponents to the bill estimate that it would cost the government over one trillion dollars, increasing exponentially as student loan amounts continue to accrue, which would need to be taken from other programs. Also, some believe that not all college students have or will put their education to good use, which would further reward and encourage irresponsible fiscal behavior.

Still, not sending the children of our country to college simply to avoid the debt doesn’t seem like a good idea, either. Higher education fills in the many gaps that exist from previous schooling, expands a student’s knowledge base extensively with both curriculum and experiences, and in many cases can be the definitive point between a future where the student willingly embarks on a chosen life-long career path or just settles for finding a good enough job to eke by.

How Did We Get To 1 Trillion Dollars?

In 1944, when the GI Bill of Rights first gave returning WWII veterans $500 towards college, Americans realized education has the power to improve quality of life.

In 1959, Congress enacted the National Defense Education Act (NDEA) which gave the first federal loans to students in specialized fields of study, and ensured that America has the ability to produce highly educated students to compete in the world.

In 1965, President Johnson signed into effect the Federal Family Education Loan (FFEL) which, although the program eventually became corrupted by favoritism between banks and educational institutions and was eliminated in 2010 by President Obama, allowed a much wider array of Americans access to federally-funded student loans.

All federal loans today are given through the Federal Direct Lending Program (FDLP) of 1993, which continues to assist an enormous number of Americans with paying for post-secondary education.

Author Bio: My name is Jon, I recently graduated college with $23k in student loan debt. Since graduation I have paid off my student loans and learned a lot about student loans that I wish I had known right when I graduated. I share tips on mistakes I made and how you can avoid them and save money paying back your student loans at

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