U.S. wealth gap widens as student loan debt collectively hits $1 trillion

KANSAS CITY, Mo. — Mortgaging the future to pay for the present. That’s the realization college graduates are coming to as interest from student loans piles on the debt. Experts say the booming student loan industry is contributing to the widening of the wealth gap in the United States.

According to the Almanac of Higher Education, two-thirds of those who attend college each year take out loans. And for those 12 million students each year, they may never catch their wealthy peers who began life after college debt free.

“This is Xander, how can I help you,” 25-year-old Xander Farris said as he answered the phone at Sarpino’s Pizza, his place of employment for the past three years.

Farris is a year-and-a-half out of college, still relying on the pizza shop to pay his bills and scale down his mounting debt.

“Will this be cash or credit ma’am,” he asked another customer as the phone rings non-stop.

For Farris it was credit. He’s now paying $350 a month toward his student loan debt. Yet still hasn’t been able to find a job in his field of study, can’t get a loan on a car, and hasn’t even thought about buying a home.

“Most people, when they get out of college, they have to go back to a low-paying job to be able to get money in their pockets to go pay bills and stuff. It’s not that easy with student loans,” he said.

Farris was one of those nearly 12 million who borrowed and because of that he may spend a lifetime trying to catch up to his wealthier peers.

“There is times where the people that don’t go to college, they are in a higher paying job, they are off making the world a better place for them and their family and those who have gone to college and are in debt, they are basically in the slums,” Farris said, questioning if it was all worth it.

Twenty-year-old Colby also slings pizza’s at Sarpino’s, one of two jobs he works to get by.

“It’s pretty stressful,” Colby said.

But the sophomore at Penn Valley Community College has so far been able to attend school without taking out student loans.

“Wake up early and go to work in the morning. Then work all day, then work until about 11 at night then I go home,” he said of his long days at both jobs in-between classes.

According to a Federal Reserve Board survey of consumer finances, $ 53,000 in education debt leads to a wealth loss of more than $200,000 over a lifetime of employment and saving.

In the end, some say it’s still worth it.

“The American dream, I guess,” said Colby.

In August, President Obama proposed the most sweeping changes to the federal student aid program in decades.  Now other lawmakers are also proposing fixes, making many hopeful changes will be made, closing the wealth gap in the future.

2 comments

  • Zoobee

    Really? Let’s talk about Obama’s sweeping legislation:

    1) The Making Progress in the 21st Century Act, by which he punishes new borrowers for taking out subsidized loans for more than 150% of their published program length, even though they may not have hit their aggregate borrowing limit, by removing not only future subsidies, but the past ones as well, making the borrower owe back interest on a loan that is not supposed to accrue interest.

    2) Ending the subsidized loan program for graduate students.

    3) Limiting Pell Grant to 12 full time semesters or the equivalent.

    4) Wanting to rank… er I mean rate (because according to Arne Duncan, there is a difference) colleges based on a ridiculous amount of criteria including, but not limited to, amount graduates earn, amount of debt, how many Pell eligible students are admitted, average tuition, scholarship amounts, transfer rates, advanced degree, etc. by 2015, and then linking those ratings by 2018 to how much aid an individual student can qualify for going to that college, limiting Pell for schools not rated high enough, charging higher interest, and offering less subsidized loans. How is that supposed to help a college improve when they can’t get students? I feel sorry for teacher education programs and other lower paying degree fields. You are getting screwed.

    #4 isn’t really legislation.. it is by Obama’s decree. His pen and phone have spoken.

    That isn’t going to “close the wealth gap”. His plans simply give the government full control over educational planning if they want to receive federal dollars, which the individual student, not the college, is supposed to be eligible for. The whole point is to give the student options for school, not take them away because you deem a school graduates too many teachers and not enough engineers.

    Never mind his war on for-profits. Gainful employment reporting is ridiculously burdensome, state authorization (requiring online schools to get certified in every single state that they have a single student in) is insanely burdensome. While there are some “bad” for-profits, there are also many who offer opportunities to students who would otherwise not be able to attend college and give choices to poor students who can’t get in to state schools and cannot afford to travel or live on campus to attend out of state schools. But nay, a private university not controlled by Obama makes him lose too much sleep at night.

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