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Human Capital: A Student Loan Crisis?

Jul 14, 2013 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Education, Government, Households, Labor, Macroeconomic Measurement, Thinking Economically • 543 Views    No Comments

1. During the great recession, student debt increased.

Human Capital increasing student loans

2. Consequently, student loan delinquencies went up.

Human Capital student loan delinquencies

3. But graduates are benefiting from their degrees.

Human Capital degree benefits

4. For one type of a federal student loan held by close to 10 million people, the congressionally mandated interest rate just doubled from 3.4% to 6.8% because the legislation that capped it expired. Debating new rates, legislative proposals have ranged from a low of .75% to 5.15%.

Human Capital loan rates

 

5. We could say that students need loans because college tuition is up.

Human Capital college tuition increases

6. Some economists say that tuition is soaring because easy to get loans create more demand.

Human Capital demand and supply

7. Others say college tuition is up because state higher education funding is down.

Sources and resources: This NY Fed report provides a good picture of the current student loan situation while here is the story of Stafford Loans. For more on why federal and private student loan totals that might be near $1,000,000,000,000 are a crisis waiting to happen, I suggest this PBS report, and these charts from BusinessInsider.

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