Student loan debt is worse than you thought

A new congressional report says the US burden is nearly $1 trillion, posing a threat to both new grads and the entire economy.

By Bruce Kennedy Jun 21, 2013 7:17AM

Image: College graduate (© Corbis)It's a fact: Getting a college degree can also get you a better-paying job. But as enrollment in colleges and universities has risen, so has student loan debt, making it the only type of consumer debt that continued to grow during both the recession and the economic recovery.


According to a new congressional report, student loan debt has nearly doubled since the recession started -- going from $550 billion in the fourth quarter of 2007 to almost $1 trillion during the first quarter of this year. And the Joint Economic Committee report says student loan debt, from both federal and private loans, "now represents the biggest aggregate balance among non-mortgage debt categories."


The report notes two-thirds of recent college and university graduates left their alma maters with an average balance of $27,000 in loan debt, which works out to about 60% of what a young graduate earns annually


Other financial challenges loom. Unless Congress acts, the interest rate on federally subsidized Stafford loans -- low-interest, fixed-rate loans for any student enrolled at least half time -- are expected to double on July 1 from 3.4% to 6.8%.


That rate increase would raise the cost of interest for students borrowing the maximum amount of Stafford loans to $4,500, or by $2,600, for the average borrower. This change was originally scheduled to take place last year, but Congress passed an eleventh-hour one-year extension.


As the Joint Economic Committee report notes, the rising cost of higher education and increasing debt burdens for students pose a risk not only for new graduates but for the overall economy.


"Higher education provides students with the skills needed to be competitive in today's global economy and creates a gateway to well-paying careers," Sen. Amy Klobuchar, D-Minn., the vice chair of the Joint Economic Committee, said last year during the first round of debate on the Stafford loans.


"But rising costs for education are putting a strain on . . . families and students, and burdening students with thousands of dollars in additional debt is simply unacceptable."


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102Comments
Jun 21, 2013 10:27AM
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I'd like to see the average loans for people who had no help from their parents. That $27,000 quite frankly is nothing, and includes people who had parents who were still able to foot half the bill. Most of my friends who had zero help average more in the ballpark of $50-100K, and those are all people who went to state school. That's really the problem. State schools are not even close to as cheap as they used to be. Depending on the state, even a crappy one is going to set you back about $15,000 a year in tuition if it's a four year, and that doesn't even include living expenses. I don't care if private universities are expensive. You should pay a premium for a premium product. But the price of college even at state schools has vastly outpaced inflation over the past 40 years. My mom was able to pay for her whole college education (at a private university no less) with a 25 hour a week job (full time during the summer). Nowadays that would barely cover your books. You could work full time while going to school and not even come close to paying your tuition (assuming you don't still live at home and work some crap job for $9/hr like most college students do).
Jun 21, 2013 9:06AM
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All done on purpose to keep people in perpetual debt, consumption and indentured to cheap money and financial servitude.
Jun 21, 2013 9:19AM
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Don't allow federal loans for worthless lib arts degrees, problem solved.
Jun 21, 2013 12:15PM
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the problem is every time the govt increases aid, the colleges raise tuition accordingly. they know how to run a calculator. the poor folks get the grants and cheap loans, the rich can pay the tuition, its the middle class that is caught paying the higher prices with no help.
Jun 21, 2013 8:04AM
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Congratulations on your degree!  Best wishes for a long and happy career.....but you still have to pay us back.
Jun 21, 2013 10:57AM
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Can we just say a collective 'duh'!!!!  You've created a system where schools are not held accountable for their performance (i.e. - stupid classes that serve no purpose in the real world, arrogant professors that don't actually teach but have someone else take the burden, a pattern of increasing 'easy' grades to cook their graduation numbers) and all they're focused on is competing for that gubment cheese.  Have fun kiddos paying for all the amenities which is where your money's really going just so you can graduate and never have them again.  College is basically saying "These will be the best 4 years of your life because we can't promise you a job after this so sit back and enjoy this brand new Student Center you'll be leaving in 4 years!"

Jun 21, 2013 9:53AM
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That's about the cost of a mid size new car which most people would pay off in 4 or 5 years.. I don't see what the big deal is. You got an advanced education and you would like it to be free ?
Jun 21, 2013 11:10AM
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According to the Gang of Eight, America needs to TRIPLE LEGAL immigration (in addition to amnesty for 11-20 illegals) because there are not enough skilled workers here already.

 

So why are we bothering to educate young Americans anyway?  The Gang of Eight's bill provides for massive increases in low, middle, and highly-educated immigrants.  And our unemployment rate is and has been high for over a decade now.

 

Hmmmm.  Very interesting future for America.

Jun 21, 2013 10:17AM
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I worked my ay through college in the 70`s.You better have a great job to do that these

days.

Jun 21, 2013 1:42PM
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What's worse than graduating college with a mountain of student loan debt?  NOT graduating college with a mountain of student loan debt!

46 percent of America's college students don't graduate college within six years.  Guess what, they still owe the money.  I'd like to see the stats on that.


Jun 21, 2013 12:54PM
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I just paid off one of my granddaughters  college lawns.   She was never financially able to pay anything since the money was loaned in 2008.  Yet the school, with easy Government money let her sign for this loan at 17 years old, no cosigner, and no collateral.  She still owes another loan that keeps adding interest and now is 25% more than the original loan.  
I got my degree  through the GI Bill, while I worked to support my wife and four step children.  If you need to go to college join the military and serve this country and earn your way through school.  If you encourage young folks to abuse easy loans and give them false promises you should be punished.
Jun 21, 2013 9:23AM
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The more that I learn about the student loans the more that it sounds like middle class welfare (the tier below that get Pell grants in which tax payers pay for their tuition)! The government is the source of funds and there is a back lash to paying the market rates for high default risk unsecured loans.  I guess everyone wants a hand out.  Wake up America!
Jun 21, 2013 12:42PM
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I went to college thinking it was a good choice. Went for education, not a ton of money, but something that is very useable. I knew on a teacher's salary loans wouldn't be easy to pay off, but I could still do it. I graduated 3 years ago and still have not been able to find a full-time job! I found that most employers would not risk hiring me because they were afraid that as soon as I was offered a teaching job,  I would leave them and with all the budget cuts in education (and across the board) veteran teachers are being given the open spots. It is not due to lack of trying, but there just aren't jobs, so how are we suppose to pay our loans?!

I agree with someone's previous post, I am well over the $27K mark, because I had parents who couldn't fund my college at all, tuition and living expenses were all on me (and yes I worked). My mid-line university's tuition went up EVERY year, which was not helpful.

Maybe colleges should start charging based on the degree seeked, rather than an across the board fee???

Jun 21, 2013 12:18PM
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In the old times before time began , you went to college then got a good job to pay for the loan. Now things are quite different and a college education does not guarantee a job. Many people are then stuck with huge debt and no way to pay for it. It's a shame this happens , but it is a new reality in the current market.  
Jun 21, 2013 12:57PM
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As a recent college grad I've see some things in college in the students that need to be changed, and it's up to parents or guidance counselors to help.

 

1. Someone one needs to tell them that doing what you love just might not be practical, if the subject you love in is not in a good field economically then minor in it if you have time, but try to major in something safer. This is also a lesson in growing up for the students.

 

2. Unless no public schools with a region have your major go to them, it saves so much money, and I would've if there was one within 500mi.

 

3.If you're unsure after a year withdraw its better to figure your life out without paying 20k a year. and if you want to go back you can re enroll. 

Jun 21, 2013 12:08PM
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Higher education provides students with the skills needed to be competitive in today's global economy and creates a gateway to well-paying careers.

 

I hear that recent grads have first pick at McDonalds and Starbucks.  Not everybody should go to college.  And you definitely shouldn't go without a plan, a financial one.  Too many people are wasting their and taxpayer money on useless education.  If there was a giant market for educated folks, I could see taking the risk, but there isn't.

 

If you can't afford to take the risk on your own dime, taking it on someone else's is worse because now two people are broke.

Jun 21, 2013 12:36PM
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China and India are laughing their collective butts off as we fight among ourselves over who deserve a education. Meanwhile, they are currently taking away almost all our manufacturing jobs while plotting ways to take away those jobs folks now going to college hope to get. The More we bicker, the more countries like China and India chip away on the Big Lead we once had in everything.
Jun 21, 2013 1:14PM
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Has anyone ever thought about all the money that is given out in Pell Grants each year to students that never finish school?  I attended a "state college" and found that classes were basically empty unless it was exam day.  Many students were there to pick up that extra cash left over from their grant and had very little interest in learning while those of us who had to pay for our education made every moment count. 

 

Yes, it is a choice to continue our higher education.  We worked hard for our degrees and we will pay.  But, maybe we wouldn't have to pay as much and more would graduate if the government started expecting a return from those students that were given the opportunity for a "free ride" only to blow it. 

Jun 21, 2013 11:48AM
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I'm sure that the Demoncraps will offer to forgive the loans as soon as the next presidential election comes around.
Jun 21, 2013 1:26PM
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College education is not all claimed to be. The debt thing is the work of the Federal Reserve which isn't even a government agency but has the backing of the US government. You tube about the Federal Reserve how it got started by secret meetings of the big bankers that's when all our financial problems began. They got us on a system of debt and worthless currency. The politicians got money and power go figure.
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