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Biggest Economic Threat: Student Loan Debt


Student loan debt is not just a problem for individuals in the United States. It is equally a concern for the society as a whole. According to Bennett and Wilezol (2013), the fact that graduates have to spend most of what they earn to pay up their loans denies them an opportunity to advance in life. Consequently, graduates take a very long time to settle after getting out of college. To survive, some graduates are forced to live with others in order to make ends meet.

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Drawing from a study by Orman (2014), close to million students take loans annually to meets their educational requirements. A similar observation by Veciana-Suarez (2014) also indicates that nearly 12 million Americans borrow every year to finance their college education. Personally, I am convinced that student loan debt is a big threat to the economy. In this paper, I will use different arguments to support my stand. I will, however, proceed by first looking at two sides of the argument.

Argument Against

There are a number of reasons that can lead people to believe that student loan debt does not pose a serious threat to the economy. First and foremost, it is presumed that the government has a responsibility to ensure that all citizens have access to education. For this reason, any expense that goes toward meeting the education needs of citizens in a country is not a waste. Obviously, failure to facilitate the education of citizens will deprive a country of the necessary workforce.

State governments should therefore do everything possible to ensure that residents get an opportunity to study. Secondly, there are other projects besides student loans that are also receive funding from governments for the benefit of citizens. An example of such undertakings is the provision of access to mortgage services for citizens. Apparently, the government spends quite heavily on mortgage services.

Student loan debt has also been blamed by different people for introducing students to loans quite early in life. According to Kadlec (2013), student loan debt has a major effect on the growth of the US economy. As a result of students taking up loans to pursue their education, they end up starting their first jobs with debts that may take too long to be cleared.

Argument For

As earlier pointed out, student loans is a big threat to the economy of any nation. Ordinarily, graduates after leaving school are expected to work in order to cater for their needs. However, because of loans taken to fund their education, graduates spend most of their time during the early days in employment to repay their educational loans. Without a doubt, this affects their progression in life. In addition, this affects the economy in a negative way. Instead of paying for goods and services, the money ends up in the hands of the government. It goes without saying that if graduates spent what they earned on paying for goods and services that directly meet their needs, the economy will grow and the country will be the greatest beneficiary.

It is obvious that the government needs money to operate and fund its activities. One of the greatest channels the government uses to make money is through taxation. By taxing individuals and businesses, it is possible for the government to generate the revenue needed to fund its projects. To improve revenue generation, it is imperative for the government to create an environment where businesses can flourish. This includes ensuring that citizens are empowered to spend.

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This being the case, denying graduates an opportunity to spend leads to reduced income for the government. Since graduates have to spend part of their fortunes to repay their education loans, revenue to the government goes down. Student loan debt is thus a major threat to the economy since it denies graduates from spending what they earn and this in turn determines the amount of money that the government receives to conduct its affairs.

The government also spends part of its revenue to create employment for its citizens. For this reason, a reduction of the government’s income also implies lack of employment opportunities. Lack of employment on the other hand will create more problems for the government including poverty and increased crime. For some people, the effect of student loan debt can have similar consequences to that of mortgages. Arguably, student loan debt weighs heavily on the economy and is a serious threat to the economy. Because of the challenges associated with student loan debt, some people have suggested that tuition fees should be reduced so as to make education affordable to all.

While borrowing is regarded as one of the key drivers of the crisis in higher education, it is just one of the culprits. Some people have blamed it all on colleges and universities that are charging so much money to offer education services. There have also been claims by some people that the government also makes huge profits by giving loans to students (Orman, 2014). Arguably, educational institutions have done very little to control the spiraling cost of education.

In order to pay their tuition fees, students are made to borrow heavily and this affects them later in life after they graduate and are ready to start a new chapter in life as employed individuals. To a certain extent, increases in student loans have contributed to the high cost of education. This presents a completely different scenario from that expected by most policy makers who had very high expectations of seeing the overall cost of education going down. On the contrary, financial aid given to educational institutions by the government in order to make education affordable for all has failed to make education cheaper and easily accessible.

Considering that student loan debt has a very negative impact on the economy, it is imperative for stakeholders to come up with strategies of supporting the educational process and ensuring that the fees charged by colleges and universities is affordable by all. The eventual goal should be to ensure that students borrow less or do not borrow any money at all to fund their studies. Once this is done, graduates will have a lesser burden and whatever they earn will end up being used to meet their needs. As they continue to spend, the cash injected into the economy through the purchase of goods and services will revamp the economy to the benefit of all.

According to Gage and Lorin (2014), there is a critical need to have a clear understanding of the financial challenges faced by students attending colleges and universities with a view of making things better for all. It is the responsibility of state governments to intervene and ensure that students are not oppressed by individuals who are just out to please themselves. Despite the fact that the process can be quite involving, it must be given priority by any government that is keen to safeguard the interests of its citizens.

In the event that students still have to take loans to finance their studies, it is imperative for the government to ensure that such loans are given to students at low rates that are affordable. As pointed out by Obi (2014), it is a big contradiction to note that most Americans are unable to comfortably pay their bills despite working so hard in life. Apparently, this has been linked to poor access to education and having to deal with excessive loans from a very early age of one’s entry into his or her career. Clearly, this has a very negative impact on the development of fresh graduates.

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From the discussion presented in this paper, it is obvious that student loan debt is a major threat to the economy. After graduation, it is now very common for university graduates to start life in debt. For this reason, state government should come up with easy and means of reversing the status quo an ensuring that the economy grows continually as expected. The fact that state government are now focused on the effect of student loan debts is a clear indication that this is a burden that governments are very ready to deal with in order to advance the economy.

It is important for stakeholders in the education sector to understand that while tuition fees continues to increase, the need for qualified professionals is here to stay. Consequently, state governments should do everything possible to ensure that education is greatly subsidized and that individuals get an opportunity to actively participate in nation building. Making education affordable and eradicating loans will play a very important role in improving the economy.


Bennett, W. J. & Wilezol, D. (2013). Is College Worth It?: A Former United States Secretary of Education and a Liberal Arts Graduate Expose the Broken Promise of Higher Education. Nashville, Tennessee: Thomas Nelson Inc.

Gage, C. S. & Lorin, J. (2014). Student Loans, the Next Big Threat to the U.S. Economy? Web.

Kadlec, D. (2013). Student Loans Are Becoming a Drag on the US Economy. Web.

Obi, P. (2014). We Must Change the Way We Live. Bloomington, IN: Archway Publishing.

Orman, S. (2014). Biggest Economic Threat? Student Loan Debt. Web.

Veciana-Suarez, A. (2014). Ana Veciana-Suarez: Student Loan Debt is Millenials’ Biggest Economic Threat. Web.

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