The student debt bubble could be the next “big one” but popping it isn’t a foregone conclusion.
At least that’s the thinking behind OneClass cofounder Kevin Wu. His startup pays students to take notes, making some money on the side and reducing the debt burden. The company has troves of data, so naturally we took a peek.
1. You went to college. Were some of the trends you’ve spotted not obvious?
Trends that are not necessarily obvious were the majority of students that are annually unprepared to make the transition from high school to University. Going to a University is not an expected step for some high school graduates, so making the transition can be unfamiliar and difficult, especially for 1st generation students. High schools and colleges do a great job of bridging the gap, but there are some aspects they don’t account for like suddenly having so much free time, with less oversight. Staying focused during college is a key aspect of completing a degree on time.
2. Which trend is most startling for policy makers?
The trend of students taking longer to graduate is a major area of concern. Delaying a student’s graduation date can lead to under-budgeting for the standard 4 years of education since they’ll have to stay longer and pay more to complete their degree.
Instead of being able to enter the workforce in 4 years, they would have to postpone their intended full-time career post-college. For employers, partial completion of a degree could lead to questions surrounding the abilities of a potential candidate, (eg. are they reliable? why did they drop out of school?) or lack of career prospects since they don’t have a degree in their expected field of study.
3. How big is the student loan “debt bubble”?
The amount of accumulated student debt surpassed $1.5 trillion according to MarketWatch in March 2018.
4. Why should governments care about student loan debt?
There is a negative effect on financial institutions if a large number of students default on their student loans. Personally, it can make opening lines of credit or receiving loans for a car, home, etc. very difficult. A person’s financial future can be drastically affected with one decision they make when they’re 18-years old, which is why it’s so important to be informed of the decisions they’re making and methods to make money to pay off their loans.
Unemployment among youth can be affected negatively. If students are unable to continue their studies and drop out of school, they are left with significant debt to pay for an uncompleted college degree, which leaves them less valuable in a competitive job market. The standard barrier of entry is a 4-year degree. When students leave college without a degree, but with mounds of debt, they’re really caught in a catch-22 situation.