Problem of Unsustainable Student Debt and How to Manage it ?
The Problem of Student Debt
Higher Education in most parts of the world is expensive and requires the students to take on loans and debt to fund their education.
While university fees were always high in the United States, the rest of the world seems to be catching up with hitherto state subsidized education systems in the developing countries such as India now transitioning to a paid and heavy expense model.
Indeed, the fact that governments around the world are paring their contributions to the education sector means that students in the future would likely have to take on more loans than they are doing currently.
This means that students in the US and elsewhere are likely to be neck deep in debt during their education and most probably, they will spend the first few years of their career in paying down the debt.
Thus, student debt is a problem that would not go away soon, and the magnitude of the problem in the US is such that it is estimated that student loans and debt took together account for nearly 1.2 Trillion Dollars.
Indeed, unless the government and academia address this problem, we might very well see a crisis similar to the Subprime crisis that nearly brought down the global financial system.
The Role of Different Stakeholders in Resolving the Problem of Student Debt
If you are a student, you will hope that the government and the other stakeholders ease some of your burden through subsidies and other forms of assistance.
Indeed, most students often join colleges and universities where there are scholarships and aid as well as fees being partly or fully subsidized.
For instance, there are universities in the US where it is common for the fees to be waived off for meritorious students in addition to providing scholarships for the needy.
Thus, it would be better if you do your due diligence and apply to those universities that have such provisions in place.
If you are a dean of a university or principal of a college, the least you can do is to partner with the private sector and ensure that the students are reimbursed their fees, partially or fully.
Apart from this, you can approach Philanthropists who would be willing to donate funds to meet student fees and other expenses so that the burden on the students is reduced to some extent.
Indeed, as responsible stakeholders, the least that universities can do is to ensure that they ease the burden on the students through various forms of assistance.
What the Government and the Financial Sector Can Do
If you are a governmental representative such as a Congressperson or a Senator, you can introduce a bill or act in the Congress and Senate so that the government steps in and subsidizes some of the loans and debts or writes off such debts partially or fully.
Indeed, this is already happening in the US where several bills have been introduced to address the problem of student debt.
For instance, the Obama Administration took the lead in addressing the problem of student debt by promising to write off some of it and linking the rest to payouts over some years instead of forcing the students to start repaying immediately after joining their jobs.
If you are a bank or a financial institution that has lent money to students, the least you can do is to ease the repayment terms and conditions in addition to lowering the interest rates on student loans.
Indeed, it is in the interests of the financial sector if students are treated generously since repayment, and future benefits accrue with easier repayment norms rather than behaving like loan sharks and forcing students into bankruptcy.
All Stakeholders Must Behave Responsibly
The point here is that it is incumbent upon all stakeholders to behave responsibly and address the problem of student debt in a well thought and coherent manner instead of being adamant and ruthless.
Indeed, given the fact that students are the professionals of the future and hence, the very future of the country depends on them, it is incumbent upon all stakeholders to address the problem of unsustainable student debt in the interests of the nation.
After all, it does not bode well for the country to have students declaring bankruptcy as soon as they begin their careers and thereby jeopardize innovation and inventiveness that are at the heart of the American Dream.
More importantly, when the government could bail out the banks that were irresponsible and took on undue risks for profit during the Great Recession of 2008, why should the students be not bailed out?
Given the fact that students also represent the pillar of the society that provides the foundation for the future, it is only reasonable that they should be provided ways and means to reduce their burdens.
Incentivize Good Performance and Penalize Bad Performance
It must be noted that we are not recommending the loans to be waived off for all students given the fact that some of them might have behaved irresponsibly and thoughtlessly.
Instead, what we are recommending is that performance linked waivers wherein those students who have excelled or have done well during college should have their loans waived off partially or fully.
In this manner, good performance is incentivized, and bad performance is penalized leading to optimal outcomes for all stakeholders.
Lastly, as has been mentioned throughout this article, students are the future, and hence, any investment on them is likely to make America Great Again which is the campaign pledge of President Trump.
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