Within the United States, there is a great need for higher education within the workforce. As many studies have demonstrated, an educated workforce is more productive and is able to engage in higher-level production tasks than those with a basic K-12 education. However, the consistent push for higher education combined with the recent economic crisis has created a glut of college graduates and a complete lack of jobs. As such, these individuals are not able to fully utilize their abilities in the workforce and are left with crushing debts that they are unable to pay off due to the inability to find employment within their field. This serves as a negative externality on the economy as a whole, as these individuals are unable to invest or purchase consumer goods such as automobiles, housing, etc. Furthermore, these individuals have put off entrepreneurial attempts as well as marriage in order to better control their spending and debt levels.
The externality is generated by the educational system at large, as college tuitions have spiraled out of control since the late 70s. Previously an endeavor in which individuals could pay for a years worth of education through a simple summer job, many students are undertaking five to six digit loans in order to cover the cost of their higher education. Furthermore, national bankruptcy provisions were changed as to prevent the default of these student loans by individuals. As such, student loans are treated as a different type of debt that is unable to be discharged through bankruptcy, which leaves these individuals perpetually stuck with massive debt levels and a lack of repayment opportunities. Taxpayers have been stuck footing the bill for defaulted payments, and there is a growing movement for the federal forgiveness of all student loans due to the drag that they are causing on the economy as a whole. High debt levels serve to lower the efficiency of the markets, as employees pursue opportunities that allow them to repay their debts rather than work more productively or create new markets and business ventures.
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"Externality".
Students have been taken advantage of, as employers are increasingly hesitant to hire individuals without a bachelors degree; this has held true even for jobs where a college degree was not necessary ten to fifteen years ago. This demand for degrees has also lowered the value of a college education, as it no longer serves as a distinguishing factor within the workforce. This prestige factor has accounted for much of the value of a college degree, and without it the cost is not justifiable. Institutions have also taken advantage of the free availability of federal student loans to exponentially increase their tuition rates, which has priced huge segments of the population out of the educational market.
The crisis has reached such a proportion that student debt has surpassed credit card debt in total worth, and significantly affects the economic opportunities and motivations of the most productive segments of society. Without any federal forgiveness or a debt ‘haircut’, the effect of this debt loan will have severe consequences for the U.S. economy. Due to the systemic nature of the crisis, it is in the public good for a government program to relieve individuals of their debt in order to stimulate the economy. Otherwise, the economy may have decreasing public consumption as well as investment due to the deferment of such purchases in favor of student loan payments. This is the only ethical option, as it provides the most good to the most number of parties involved.
