The federal government of USA decided to grant loans to student in the year 1965, which is still continuing. The students were granted loans, so that they can study in the college and repay the loans when they find a job. However, it is this program that has turned out to be a pain in the neck in today’s economic condition of America. This is because it is these loans that are threatening the US economy. There are of course several reasons why such a situation has aroused today. A brief study will indicate the reason why the student loans are keeping the condition of the economy down.
Increased Rate Of Interest:
Recently, the rate of interest on the student loan has been increased to 6.8% from 3.4 %. This is indeed a huge rise, which has made it very difficult for the students to repay the loan.
- The change in rate will make it students to pay extra $1000 every year for every loan.
- These student loans have thus surpassed the auto loans and the credit loans, as a whole.
Thus, the explosion of the debts has definitely led to the increase in the burden of the tax payers making it very difficult to recover the loan. As a result, the economy of the country will be worse affected.
Increased Rates Of Unemployment:
Well, there was a time when studying in colleges gave the possibility of plenty of job opportunities. As a result, larger numbers of people seeking loans today has increased. However, the situation has become difficult today because
- There is no good source of jobs through which the debts can be fulfilled,
- The cost of the monthly payments are higher due to which these students cannot contribute to the economy,
- Painful lessons in math and economics.
This had badly created an impact on the economic condition of the country.
Economy Is Recessing:
The economy is still in the phase of recovery from recession. This in turn, will worse hit all the citizens of the country including the students, as well. Consequently, the economists have estimated that the national student loan can be harmful not only for the economy but also for the students, as well. In fact, it has created a terrible impact on other sectors including
- Entrepreneur risk taking
- Tax payers.
Since most of these loans are paid by the government, people associated with these sectors will be hurt badly.
The crisis of student loan is fast and is also the most unregulated one. The consequences for the economy will also be far reaching and these will prevent the students from making promissory notes. Most of the students are also looking forward to defer the loan payments. These might be mainly because of high interest rates or unemployment. This also indicates that unable to pay the loan, the students are unable to spend money on other goods and services. Thus, it will create an impact on the economy definitely.
Kevin Craig has written this informative article. He is a financial writer associated with best-binaryoptionsbrokers.com. He has been providing advice on finance since 2005.