What is the value of a college degree?
This podcast episode examines the worth of a college degree and the impact of student debt payments on the US economy as America's pandemic-era moratorium on student debt payments comes to an end in September.
Topics
Posted 8/24/2023, 4:54:40 PM
economist.com
Relevant topic timeline:
The impending resumption of student loan payments after a three-year pause due to the pandemic is causing financial strain for borrowers, potentially leading to defaults and economic repercussions, despite some borrowers using the pause to pay down debt and improve their financial situation.
Americans are struggling to pay their bills as inflation rises, leading to a surge in credit card and auto loan defaults, which is expected to worsen with rising interest rates and the expiration of the student loan moratorium. Low- and middle-income earners are particularly affected, resorting to using credit cards for essential purchases, while opening new lines of credit to pay off debts, resulting in record-high credit card debt. The resumption of student loan payments and potential holiday season spending add to concerns about escalating debt levels.
U.S. consumers have accumulated $43 billion in additional credit card debt during Q2 2022, three times the average amount since the Great Recession, and credit card interest rates have soared to over 20%, raising concerns about the impact of inflation and rising interest rates on consumers' ability to pay off their balances. However, some economists argue that higher wages are helping consumers keep pace with their debt, and the overall rate of charge-offs remains low. Nonetheless, the combination of spent-down pandemic savings and the resumption of federal student loan payments could pose challenges for lower-income borrowers and hinder consumer spending.
Women, who hold two-thirds of the $1.7 trillion federal student loan debt in the US, face a greater struggle with loan repayment due to lower earnings and the gender pay gap, which will become more evident as borrowers resume loan repayments after a pandemic pause, exacerbating their financial burden.
"College: Is It Worth It? The Future of Higher Education"
In this episode of Have a Nice Future, Gideon Lichfield and Lauren Goode speak with Paul Tough, an education journalist and author, about the future of higher education. They discuss the rising costs of college, the diminishing return on investment, and the uncomfortable questions surrounding the purpose of higher education. They explore whether college can still be considered a worthwhile investment. They also examine the decline in college enrollment and the changing attitudes towards the value of a college degree. The conversation highlights the need for reform and the importance of creating a more equitable and accessible education system.
The resumption of student loan payments in October is expected to negatively impact American economic growth and could harm borrowers and the wider economy alike, with economists predicting a potential disruption to the growing economy and a reduction in consumer spending.