It seems the Federal Reserve has figured out something that I previously reported on (Student Loan Debt Is Killing the American Dream), that student loan debt is keeping young people from buying homes.
Later, I will show you an alternative to racking up high student loan debt.
Federal Reserve Conclusion
Federal Reserve economists studied the impact that the $1.5 trillion owed in educated-related loans is having on former students aged 24 to 32. The Fed’s research found that while student loan debt is not the principal contributor to the decline in housing purchases, it is playing a significant role.
Fed researchers Alvaro Mezza, Daniel Ringo, and Kamila Sommer said in a paper, “In surveys, young adults commonly report that their student loan debts are preventing them from buying a home. Our estimates suggest that increases in student loan debt are an important factor in explaining their lowered homeownership rates, but not the central cause of the decline.”
The paper did not identify the other causes for the decline. The paper indicated that about 20 percent could be attributed to the student loan burden.
Homeownership among all Americans for the study period declined 4 percentage points, from a peak of 69 percent in 2005 to a low of 65 percent in 2014. However, the decline in ownership was much more prominent among those in the 24-to-32 group, which saw a decline from 45 percent to 36 percent.
Americans owe $1.5 trillion in student loans
According to Federal Reserve Data, student loan debt, now at $1.5 trillion, exceeds all consumer related debt. Outstanding student loan currently exceeds auto loan debt ($1.1 trillion) and credit card debt ($977 billion).
Fed economist said per capita college debt doubled during the period (2005 to 2014) from $5,000 to $10,000.
Much of the debt surge came during and after the financial crisis in 2009. Many students went to college believing that a degree would increase their odds of finding a job. A majority of them took out student loans.
According to The College Board, among those that finished a bachelor’s degree in 2016, the average new graduated owes $28,400.
Women Are More Impacted Than Men
College and university attendance for women is steadily increasing. In the fall of 2016, women represented 56 percent of those enrolled in American colleges and universities. Many are using student loans to pay for it.
Many people do not think of student loan debt as a women’s issue.
Overall, women owe more than men. More women take out loans, and when they do, they borrow more money. According to a report by the American Association of Women, the average woman owes $2,740 more than a man upon finishing a bachelor’s degree.
Because of the gender pay gap, women have less disposable income available to repay their loans after graduation, requiring more time to pay back their student loan than is needed for men.
Obviously, increasing the amount of time needed to repay a loan results more of the payment going towards interest.
Free College Tuition
There are many people in the United States that believe that college tuition should be free.
Senator Bernie Sanders is one such person and is pushing for free college tuition. He wants to make tuition free for all in-state students at community colleges, as well as those at four-year public colleges whose families earn less than $125,000 per year.
This sounds like a good idea.
But with the way things work in Washington, don’t hold your breath waiting for this to happen.
Luckily, if you are open to completing a program entirely online or studying abroad, college tuition can be free.
Free Tuition In America
University of the People is an American non-profit distance learning institution of higher education that offers tuition-free undergraduate and graduate degrees.
Degree programs include:
- Business Administration Degrees and graduate (M.B.A) programs
- Computer Science
- Health Science Degrees
- Education Degrees
Attending the school is not totally free. Instead of paying tuition, students must pay some administrative costs. These include the processing fees for applications and final exam assessments; however, students who cannot afford the administrative costs may be eligible for scholarships.
Countries With Free or Nearly Free Tuition
About two dozen countries provide free tuition or nearly-free tuition at public colleges and universities. Some restrict the free tuition to citizens. Others provide free tuition to all international students or a subset, such as free tuition for all European Union (EU) citizens.
Europe remains a well-known, highly sought-after destination for students seeking refuge from high-priced U.S. colleges and universities.
Here are a few countries that offer free tuition to international students and programs of study entirely in English.
- Norway
Students willing to brave harsh winters and a high costs of living might consider earning their degrees in Norway. Tuition is free at public universities. Students have the opportunity to earn degrees at top-ranked institutions: University of Oslo, Norwegian University of Science and Technology, and the University of Bergen.
- Finland
Until recently, citizens and international students paid no tuition at state-run universities. However, starting in 2017, international students wishing to earn degrees in English will pay approximately $1,650 or more per year, depending on the degree level and program of study. Doctoral students, as well as those pursuing their studies in Finnish or Swedish, still pay no tuition. The government also plans to offer scholarships and financial aid to international students with exceptional academic backgrounds.
- Sweden
Only students pursuing research-based doctoral degrees get free tuition in Sweden; some programs of study even offer stipends to international students. Nevertheless, students should be aware that Sweden’s high cost of living may put them over budget, even when they pay nothing to earn their degrees.
- Germany
Germany needs skilled workers, and this reality creates a win-win situation for American students. All students enrolled in any of the country’s public universities can attend for free. What’s more, German universities offer a wide range of programs entirely in English, and an American student can earn a university degree in Germany without speaking a word of German. Top-ranked institutions, such as the University of Munich and the University of Bonn, mean that U.S. students don’t have to trade prestige for cost.
- Slovenia
Cultural experiences, proximity to tourist destinations in Italy and Croatia, and free university tuition make Slovenia an attractive choice for students wanting to earn their degrees abroad. Like Germany, Slovenian universities offer numerous programs of study in English.
- France
In the past, students needed to speak French in order to attend university in France. This is no longer the case. Many programs of study at both public and private universities are offered in English. Students who attend public universities usually pay a few hundred dollars per year, depending on the degree level and program of study. Over the years, France has modified its free tuition model, and some EU students pay tuition based on family income. Such changes may eventually impact how much international students pay to attend French universities.
Beyond Europe
Public universities in countries such as Mexico and Brazil also have virtually free tuition; students pay registration fees, which amount to very little when considering the exchange rates. Some universities offer top-quality programs of study in English. Earning a degree south of the border also makes it possible for students to learn highly sought-after languages of commerce, such as Spanish and Portuguese.
Americans can also attend university in China and pay approximately $3,000 per year which is very affordable when compared to U.S. tuition rates. The best tuition deals in China, however, are reserved for students able to pursue their studies in Chinese.