The problem on student debts

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The Problem of Student Debts
Introduction
The Federal Government and Statistics Canada estimate the total student debt to be over $31.67 billion (Schwartz and Finnie 499). In average, every student with debt owes either the government or non-governmental lending institutions $27, 000. These statistics might be understandable if the debts improved their financial security, but for the majority of Canadian students, no desired results are achieved by the borrowers (Chapman and Lounkaew, 113). Instead, they find themselves stuck with the debts. Therefore, this paper analyzes this problem and suggests an effective solution.
Causes of the Problem
The rapid rise of students’ debts is scaring. This is a problem that has developed over the last few decades. However, people do not understand the real causes of this crisis. The major causes include:
Lack of proper funding from the government – the government has been reluctant in funding learning institutions over the last few decades. As a result, they have resorted to making up for the cuts by increasing their tuition fees (Arthur 31). Students, therefore, had to borrow to pay for their education fully. This has consequently led to an increase in the students’ debts.
Default in loan payments – the major problem is students defaulting to pay back their loans (Hillman 171). Some have justifiable reasons because of legitimate problems such as little income while others are not just willing to pay back.

This has led to an increase in the student’s loans.
Effects of the Problem
The effects of students’ debts are numerous. From the economy to the personal lives of the students, the problem runs deep into the daily operations and choices of students. They include the following:
Career choice – because of the huge debts, students are forced to focus on getting a job to pay back their loans rather than starting their careers (Rothstein and Rouse 153). Finding a job in the recovering American economy is limiting, as students find themselves settling for odd jobs. This normally devastates them.
Economy – these debts hold back borrowers which negatively affect the economy (Kim 81). For instance, the debts slow down the housing market since borrowers are held back and left unable to buy homes using mortgages.
The debts also stifle spending among the borrowers. Because they focus on paying back their loans, their spending is limited to the basic commodities. According to Steven Harrast (23), most students do not see a car as a priority because they are paying back their loans.
Solution
Current Solution:
Income-Driven Payment Plan
Currently, the government has laid down an income-driven payment plan to reduce the amount of students’ debts. However, this has not worked because of various reasons. The most justifiable reason is the unemployment rate and the imbalance between income and debt (Jackson and Reynolds 341). For instance, a student might owe the lending institutions $20, 000 and gets a job that pays only $15, 000. This imbalance has made it difficult for students to comply with the plan put in place to repay their loans.
Proposed Solution:
Increase Job Opportunities
The main reason for defaulting in the payment of these loans is the lack of jobs when a student finishes their studies (Ferguson and Wang, 17). If the government can find a way to accommodate these students in the job market, they will have the financial ability to clear their loans.
Clear the Student Debts
The Canadian government is focused on educating their youth. However, the current high student debts have stifled the education sector (Millican 637). The government should intervene and clear all the debts owed by students to allow them to grow economically. These debts affect them in many ways. Because of the high unemployment rate in Canada, it is highly unlikely that the students will pay back the debts in full. Therefore, government intervention seems the logical solution.
Best Solution: Increase Funding for Learning Institutions
Most learning institutions are underfunded. As a result, they take advantage of the subsidized loans by the government to admit as many students as possible to obtain the funds they need. They also increase tuition fees making education expensive. If the government increases funding for schools, the tuition cost will be reduced thereby reducing the amount of money borrowed by the students. This will ultimately decrease the debt.
Conclusion
Students’ debts are a serious issue for the education system. In this whole crisis, students are the most affected because the learning institutions benefit from these loan arrangements. They make the situation worse by taking in more students to get more money from the lending agencies. Therefore, to solve this problem, radical measures must be taken. One of these radical measures is to increase funding for learning institutions.
Works Cited
Arthur, Chris. “Financial literacy education as public pedagogy for the capitalist debt economy.” TOPIA: Canadian Journal of Cultural Studies 30–31 (2014).
Chapman, Bruce, and Kiatanantha Lounkaew. “Student loan design for higher education financing: Conceptual issues and empirical evidence.” XXV Meeting of the Economics of Education Association. 2016.
Ferguson, Sarah Jane, and Shunji Wang. Graduating in Canada: profile, labor market outcomes and student debt of the class of 2009-2010. Statistics Canada= Statistique Canada, 2014.
Harrast, Steven A. “Undergraduate borrowing: A study of debtor students and their ability to retire undergraduate loans.” Journal of Student Financial Aid 34.1 (2014): 2.
Hillman, Nicholas W. “College on credit: A multilevel analysis of student loan default.” The Review of Higher Education 37.2 (2014): 169-195.
Jackson, Brandon A., and John R. Reynolds. “The price of opportunity: Race, student loan debt, and college achievement.” Sociological Inquiry 83.3 (2013): 335-368.
Kim, Dongbin. “The effect of loans on students’ degree attainment: Differences by student and institutional characteristics.” Harvard educational review 77.1 (2007): 64-100.
Millican, Juliet. “Higher education and student engagement: Implications for a new economic era.” Education Training56.7 (2014): 635-649.
Rothstein, Jesse, and Cecilia Elena Rouse. “Constrained after college: Student loans and early-career occupational choices.” Journal of Public Economics 95.1-2 (2011): 149-163.
Schwartz, Saul, and Ross Finnie. “Student loans in Canada: An analysis of borrowing and repayment.” Economics of Education Review 21.5 (2017): 497-512.