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As the ranks of the presidential candidates of the Democratic Party 2020 continue to grow and the chaotic chaos of Trump proliferates, it is easy to miss a crisis that is worsening and is already affecting millions of households. is about to get worse.
It's metastasized well beyond a topic of discussion on a candidate's whitening list. If nothing is done, it will result in generations of poverty, faster income disparity and income disparity, as well as economic prospects for the country, let alone adults who can afford to start a family. .
Student debt which was $ 521 billion in 2006, has now climbed to $ 1.57 trillion, an increase of more than 200%. This places it second behind the country's overall mortgage debt and half a trillion more than the US total. credit card bill.
According to the Urban Institute, every fiscal quarter is another 250,000 student borrowers see their loans in default, one million per year. Currently, 11.5 percent student loans from the nation are in default but the Urban Institute predicts that by 2023, in just four years, this default rate will approach almost 40% catastrophic.
A university loan default becomes even more ruinous when the student gives up before obtaining a degree. Currently, 56 percent of dropouts from here the sixth year. At this stage, the life of a young adult is economically immersed since dropouts earn 35% less, an average of $ 21,000 less per year than their classmates who persevered until obtaining their degree.
In many ways, this worsening crisis is being built on the Great recession when Americans lost $ 20 trillion in household wealth. This erosion of an economic base that had taken generations to build and its Wall Street harvest was felt most intensely by African Americans.
Now the data show that there is a replica in the form of the impending tsunami of insufficient student debt, which will most severely affect communities of color, according to data compiled by the National Center for Education Statistics and demos, a progressive think tank.
"Not only are students of color more likely to borrow to graduate and to borrow higher amounts for the same degree, but they also have more difficulty repaying their loans than white students," Mark Huelsman, a senior political analyst from Demos said Student Loan Hero. "Colored students are also overrepresented in for-profit colleges and universities, which account for a very large proportion of student loan repayments."
"Among the black students who started school in 2003, one in two has defaulted on student loans over the next 12 years," said Hero Loan.
In his testimony before the Senate Banking Committee, US Federal Reserve Chairman Jerome Powell said: it was "not something that can be found in the data for the moment" but, he added, the over-indebtedness of students cast a real shadow over the country's economic future.
"You risk seeing long-term negative effects on people who can not repay their student loans. It hurts them credit ratingthis has an impact on all half of their economic life, "said Powell. "As this continues, and as student loans continue to grow and grow larger, this could be a drag on growth."
"While young adults are struggling to repay their loans, they are forced to make financial concessions that hold back the economy," he said. Bloomberg. "Student debt has delayed household formation and led to a decrease in the number of homeowners. Bloomberg Intelligence shows that 16% of young workers aged 25 to 35 lived with their parents in 2017, an increase of 4% over 10 years ago. "
But it's not just a problem for twenty or thirty years. Thanks to the former vice president Joe Bidenwho, as a senator from Delaware, has met the expectations of the banks and made the debt of students non-releasable by bankruptcy, no generation escapes the student loan agreement.
It is a predatory policy that even a Conservative like Powell had trouble explaining when he appeared before the Senate Banking Committee. "Only among all types of debt, we do not allow a student debt to break free from bankruptcy," Powell said. "I could not explain why this should be the case."
In February, the Wall Street Journal reported that Americans over 60 had an $ 86 billion budget. student loan deb, a rise of 161% between 2010 and 2017.
The loans were often the result of loans for the education of their children or loans they had accumulated to go to school or higher education.
The Review reported that the government had resorted a few years ago to granting a loan repayment through social security benefits and tax refunds to 40,000 people aged 65 and over , an increase more than three times higher than 362% ten years ago.
According to the research of Interdisciplinary Association for Population Health Science millions of parents too young to retire with little reserve, but who have borrowed heavily for the education of their children.
"Meanwhile, the average household nearing retirement has only about $ 12,000 in retirement savings, which indicates that it's not prepared not only for retirement, but also unforeseen financial shocks, "wrote Dr. Katrina Walsemann, Director of Health Promotion, Education and Behavior. at the Arnold School of Public Health at the University of South Carolina. "Add more debt to these households, and parents may find themselves under undue financial stress. The potential negative impact of such stress is well documented, particularly with regard to psychological well-being. "
She continued: "For example, financial debt has been linked to poor mental health, greater anxiety, and shorter sleep.
The health-related trade-offs that parents can make in the transition to retirement and fixed income may be just as pressing. Repaying student loans can force parents to choose, for example, between paying their loan and paying for drugs or even food. "
Last month, Senator Elizabeth Warren released a $ 1.25 trillion proposal to cancel most student loans and create a free public college.
Under his proposal, a student loan of up to $ 50,000 would be canceled for each person with a family income of less than $ 100,000, and borrowers with incomes between $ 100,000 and $ 250,000 would qualify for relief. of college debt.
"It affects people's lives," Warren said. New York Times in an interview. "It's a chance to talk about what's broken and how we fix it. It's the American dream. "
In his first-person post on Way Warren recounted his own experience in higher education at a time and place where "tuition was only $ 50 per semester" and had graduated to become a teacher to the students. having special needs.
"Higher education has opened me a million doors," she wrote.
"So the daughter of a janitor from a small town in Oklahoma could become a teacher, a law professor, a senator, and eventually a presidential candidate for the United States."
But she rightly notes that it is "practically impossible for a young person to find this kind of opportunity. "
So far, any call for a serious review of student debt relief has been stifled by the voices of those who have paid off their student loans and who see other people's delinquency as a sign of the moral defect of the student. debtor. And, as with any multi-billion dollar merger, there is a lot of blame.
Yet, as she often does so well, Warren points to the systemic failures that are the real drivers of the crisis.
"As the states have invested less per student to community colleges and four-year public colleges the schools themselves have tuition and increased fees to fill the gap, "Warren wrote. "And instead of intervening to hold states to account, or to take on a larger share and maintain reasonable costs, the federal government has opted for a third option: to incite families who can not afford to pay the disproportionate costs of higher education on loans ".
And she tells how every step of the way was determined by public policy choices co-opted by financial interests who bought our policy.
"We have entered this crisis because the state governments and the federal government have decided that instead of treating higher education as a free and accessible public school system for all Americans, they preferred to reduce the taxes of billionaires and giant corporations and to offload the cost of higher education on students and their families. The student debt crisis is the direct result of this missed experience. "
In response to Warren's proposal, the drafting committee of the Los Angeles Daily News She warned that her proposal ran the risk of "moral hazard" by encouraging current students to "borrow as much as possible and wait for the debt to be canceled in the next presidential primary campaign".
Hmm. When did we last hear about the dreaded dangers of "moral hazard"?
It turns out that Warren's proposal is a real deal compared to the $ 14.4 trillion it cost for the Bush-Obama Wall Street bailout.
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