Higher education has always held a space as a beacon of hope for our country. The great equalizer and a platform for hard working Americans to retool and come out with the skills necessary for the jobs of tomorrow. One of the big challenges being faced in higher education of course is the incredibly high cost to go to college. Many private schools charge $50,000 to $70,000 a year to attend for a 4-year degree. And now with many universities being remote, people are realizing what they are getting for via Zoom (and it is certainly not worth it for basic courses). With college, we have the credential piece but also the experiential experience of being on-campus. Right now, the on-campus experience is largely absent. But you know what isn’t absent? The $1.68 trillion in student loan debt floating in the market.
The crushing debt of student loans
Why this matters: The student loan crisis is not new but it is being magnified by the current crisis. Many smaller colleges are not going to survive this. Why? Many rely simply on the on-campus experience and with that being taken away, you have many online alternatives with bigger name brand schools so small liberal art schools are bracing for a tough fall.
Yet the amount of student debt in the system is jarring.
$1.68 trillion in student debt is floating out in the market. The latest data also shows that 11 percent of those with students loans are behind on payments. The current crisis has allowed a “pause” on payments until September but this is simply kicking the can down the road. So those with government backed loans (most) now can take a break and not pay on the $1.68 trillion in debt. How does that solve this issue? It helps in the short-term but the amount simply keeps growing by the day. This is not a good trend.
The key takeaway: There are nearly 5,000 colleges and universities in the United States. Many will not survive this crisis because there has been rampant tuition inflation in this market. How can you justify $50,000 a year when you are taking Econ 101 or Accounting 101 over Zoom? At that point, just go for the lowest cost option. This is the dire situation many colleges are facing as students start planning their fall quarters.
Top private and public schools will endure this because of their brands. But even in those cases they will take large hits to their budgets. Other schools just don’t have the ability to adjust.
There is going to be massive disruption in the higher education space and $1.68 trillion in student debt is just crushing to young Americans, especially many of those just trying to find a job in this market. Fall is going to highlight some dramatic changes in the higher education space and once the pause resumes after September, you are going to see the delinquency figures shoot right back up.
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