Degrees, Drinking… And Debt: America’s Student Loan Burden Poised to Hit $1 Trillion
One trillion dollars.
That’s the projected level of U.S. student loan debt this year, according to Mark Kantrowitz, publisher of FinAid.org and Fastweb.com. Back in 2000, student debt checked in at $200 billion, so we’re talking about a 400% surge.
Student debt is piling up so quickly, it even outpaced credit card debt growth for the first time in 2010.
On the face of it, that ugly data underscores the massive inflation in education costs over the past decade. But how you interpret those numbers depends on whether your glass is half-full, or half-empty.
“Smart” Debt or Heavy Millstone?
No doubt you’re familiar with the business adage about how you need to spend money to make money.
A similar line of thinking applies when it comes to qualifying student debt, based on the notion that college education is a long-term investment in a person’s future. Quoted in The New York Times, Susan Dynarski, a professor of education and public policy at the University of Michigan, says, “When you think about what’s good debt and what’s bad debt, student loans fall into the realm of good debt, like mortgages.”
Recent figures back that up, too. In late 2010, the Conference Board revealed that the median income of bachelor’s degree graduates working full-time in 2008 was $55,700 – almost $22,000 higher than high-school graduates.
Nevertheless, more students are saddled with a fat debt once they leave college…
- Two-thirds of bachelor’s degree students now graduate with debt, taking on an average of $23,165. As recently as 1998, those figures were 58% and $13,172, respectively.
- According to the California Public Interest Research Group (CALPIRG), the number of students graduating with more than $25,000 in debt has tripled over the past decade.
- The 2007-2008 National Postsecondary Student Aid Study shows that 25% of students borrowed $30,526 or more, with 10% owing more than $44,668.
And with the debt burden now heavier, it’s having a greater effect on the broader economy. For example, many graduates are delaying big decisions like buying a home, getting married, having children, and are generally seeing their spending power reduced.
Is There Any Aspirin for America’s Student Debt Headache?
Finding much relief from the student debt problem isn’t easy.
In fact, some say that with tuition fee inflation rising so rapidly, we’re experiencing another bubble in America.
College Board research between 1978 and 2008 shows that while the overall cost of living and medical costs in the United States rose by 2.5 times and six times, respectively, college tuition fees jumped almost 10 times higher over that period.
Clearly, that trend can’t continue unabated, or America risks becoming a nation of non-college-goers, with lower education threatening its place in the world. But the current round of budget-slashing across the country – including money for student grants and university funding – doesn’t bode well.
Already, the Department of Education states that 25% of students who attended for-profit colleges or universities defaulted on their loans within three years of starting the repayment process. And with the job market still struggling, that figure isn’t likely to decline anytime soon.
P.S. My colleague, Justin Fritz, has spotted a fast-growing trend that’s helping to relieve some of the burden on students’ costs – a trend worth $1 billion, in fact.
As Justin explains, the “Digital Age” is also changing the way education is delivered, with technology pushing out traditional, costly textbooks, in favor of e-books. And one company has moved to the forefront of this industry. Get the full story here.