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Student Loans Are not an Option!


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Student Loans: Their impact on the economy

As said earlier in some blogs, students loans are believed to have hit the $1 trillion dollar mark in the USA alone. What does tghis mean? it means a whole lot. At this rate, it means a majority of students graduating are already saddled with debt right up to their eye-balls.

     The implication of graduating with debt is far reaching. It must be avoided if at all possible. If you have debt, it means upon getting a job you begin making payments. Yes, that loan is not going to go away, unless you live in a socialistic country that forgives student loans. Let us look at the consequence of paying back student loans. In the USA, our favorite uncle begins to ask for his money back. You have to oblige, no exception. This means your disposable income is reduced. Aha! Were you ready for this. Probably no. The question is what kind of salary or wages are you drawing? You probably have to sacrifice a quality life style to pay back your dues. However, you still need a car, an aprtment or flat. If you consider buying a house that is another question. The issue becomes of affordability. How much room do you have to engage in these extra money involving activities.

     Obvious, student loans spawning into billions and now a staggering trillion have an impact on the economy. Suppose there are no student loans. Suppose we all pay cash and apply scholarships towards our room and board. What happens? It is good news to the economy. Our marginal propensity to spend increases. Or better still our marginal propensity to save is increased. This means our disposal income is increased leaving us with more to either spend on necessary items or save for rainy days. Even just plain saving and have the money put to use by commercial lenders and obtain interest, although paltry. Savvy investors take the savings and put in the stock market and hope to obtain capital gains and/or dividends. The impact is huge and well pronounced. That is if you do not have to pay back school loans. One can make for a strong argument of not taking school loans. The basis of the argument will be embedded in the fact that school loans do not foster economic growth. It is indeed a valid arument but less debated. The large amounts of student loans to date is eveidence of the absence of fervent debate about the topic. Yet the need to discuss and come up with alternative solutions cannot be ignored.

     Here is a school of thought? Why is that economists, with all their intelligence, are failling to blare their horns. I am dumbfounded by their silence. What I notice there is much about policy arguments fiscally and economically. However, the presence of a chilling silence concerning a crucial matter of life is equally alarming. While I understand Economics is body of science that sometimes issue various results, it is encumbent upon economist to drive home the message of certain issues of life. Yet economists of today are silent on this issue. It is sad and eqaully disturbing. Are they afraid to come out openly attack the idea of school loans? And if they are, why? Should the cost of eductaion be exorbitant to a point only the rich can afford paying cash while the rest we have to be saddled with debt? It is obvious a higher cost of education has a severe impact  on the economy. Look what happened to the stock market when it was over-valued. It crashed. Look what happened to the housing bubble. It burst. And we are paying dearly for it, including me, Now, if you think the cost of education is just going to affect those taking school loans alone think again. It affects the economy, which means it affects you. Therefore we owe ourselves a degree of responsiveness to this isuue.

     The was now to serious begin addressing student loans. If this article is good reading please refer it to your friends, family and social media circles. Thank you.

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