The rise in student borrowing has accelerated dramatically over the years, as now more than two-thirds of college students borrow to pay for college, according to a government study, up from just 58 percent 12 years earlier.
The average debt taken on by students to pay for higher education is now $23,186, up from $13,172 during the same time period. Meanwhile, tuition has grown at about twice the rate of inflation in recent years.
Many students, however, owe far more than the average, especially those who take more than four years to graduate or go on for graduate degrees.
The amount borrowed by students grew by about 25 percent over the past year, the highest year-over-year since records were first kept, according to the department of education. This rising cost of tuition and loose lending standards may be fueling the fire.
Given the current job market and the growing levels of debt, many graduates find themselves in a difficult environment upon graduation. In a 2006 survey of college graduates by Alliance Bernstein LP, 39 percent of college graduates expect it will take 10 years to pay off education-related debt.
This has repercussions after graduation, with 44 percent of surveyed graduates suggesting they delayed buying a house and 28 percent delayed having children because of education-related debts.
For those seniors worried about entering the job market and underclassmen worried about the exponentially growing cost of attending a university, what options are there?
According to Sallie Mae, the United States’ largest college student loan company, graduates can request deferral or forbearance, which can temporally suspend payments during a period of financial hardship – keep in mind, interest will continue to accrue during this period. Graduates can also request an extended-payment option, which reduces monthly payments and extends the loan term.
Furthermore, graduates might consider living with their parents after graduation, delaying the purchase of that new car they’ve been waiting for, continuing a diet of ramen noodles instead of shopping at Whole Foods, or postponing the cliché tour of Europe with friends upon graduation.
In Washington, the education committee approved an Obama initiative in July, which seeks to shut down the 55 billion dollar Federal Family Education Loan Program (FFELP). The bill would give the Education Department oversight over student lending. The plan would increase the government share in loan origination from the current level of 20 percent to 80 percent on July 1, 2010, according to the Wall Street Journal.
The remaining 20 percent would be left private. If the plan passes, taxpayers will put up approximately $100 billion per year to lend to students.
According to Reuters political analysts, the bill should easily pass in the House, but may face headwinds in the divided Senate.
Students with outstanding loans after graduation should talk to their respective loan providers and discuss payment options upon graduation.