In the illuminating words of Ken McElroy, as featured in Jetset, the Affluent Lifestyle Magazine’s Issue 4, “The Reality of Student Debt Putting Homeownership Out of Reach” offers a dire warning that should reverberate through the halls of power. The dream of owning a home, once a cornerstone of the American Dream, is now slipping away as student debt looms like an ever-growing shadow over the hopes of countless individuals.
The figures are sobering and the trajectory alarming; the cost of college tuition has skyrocketed in the last two decades, with students at public colleges shelling out $10,388 (in-state) to $22,698 (out-of-state), and private colleges demanding an astounding average of $38,185 per year—and let’s not forget the additional costs for room and board or meal service. When you total up these fees, students face a staggering bill of $24,388 to $52,185 annually. For a four-year degree, this sums up to a financial gargantuan of $97,552 – $208,740, dependent on the choice between public or private institutions. Add specialized degrees like Law or Medicine into the mix, and the numbers reach even more astronomical heights.
Confronted with such exorbitant costs, loans become a necessary evil for many. In the United States, the burden is widespread and heavy, with 43 million residents bound by the chains of federal student loan debt, amassing over $1.6 trillion. This mountain of debt isn’t just a personal crisis—it’s a national economic concern. Saddled with extensive financial obligations, individuals are forced to postpone or completely forego homeownership, as the ability to save for a down payment or qualify for a mortgage becomes an impossible feat.
Interest rates only exacerbate the issue. As of 2023, federal student loan rates hover at 5.50% for undergraduates and spike to 7.05% and 8.05% for graduate and professional studies, respectively. With these rates, not only does the original debt increase, but due to capitalization, any unpaid interest gets added to the principal amount, causing the total debt to balloon before the borrower can make their first payment.
Take, for example, a graduate who steps into the real world already anchored down by a $320,000 student loan debt. In just six months, with no contributions made, this figure inflates to an overwhelming $415,000. Attempting to repay this on an income-based repayment plan, one might spend $550 monthly, but after 30 years, they would have only chipped away $198,000 of the massive $415,000 sum.
So, what’s the solution to this escalating crisis? The impassioned debate rages on: Should student debts be forgiven, reduced, or restructured? Should the government cap tuition fees or even entertain the concept of free higher education? What remains clear is the urgent need for intervention; without it, not only will individual futures continue to suffer under financial duress, but the economy will bear the brunt as well.
Action is imperative. To revive the waning prospects of homeownership and liberate a generation from the shackles of debt, we must call upon policymakers to heed the alarm sounded by McElroy and countless others. The time has come to redefine the reality of student debt and restore the promise of what home can mean in America.
JoAnna Laiscell, February 6, 2024
For more blogs, click here
