Tag Archives: student loans

Debt by the Numbers

Elaine Hirsch, Kmareka’s West Coast correspondent, sends us a disquieting post about the hard realities of the high cost of college. Thanks, Elaine for the research and for dealing with a tough topic–

Statistics of Student Loans

For many students enrolling in college, student loans are the only viable payment method that allows them to attend. Student loans can be subsidized (awarded on the basis of financial need without interest accrual during school) or unsubsidized (when interest is charged as soon as the money is lent out). In either case, many undergraduate and masters degree students often go thousands of dollars in debt just to receive an education. Yet is the cost really worth the outcome?

The National Center for Education Statistics reports that since 1987 the average cost of attending college has risen by 360 percent, or from about $3,599 to $12,979, based on national averages. In the 2003-2004 school year, about 35 percent of all undergraduates took out some form of loan, with an average amount of about $7,336, which adds up to a little under $30,000 in debt for the full four years. In the 1992-1993 school year, roughly the same percentage of students took out federal loans (about 32 percent), but the average amount taken out was substantially lower, at about $3,884 (transposed to $15,000 for four years).

For graduate students, the amount borrowed is substantially higher. In 2008-2009, an average of 56.4 percent of all graduate students took out loans, with higher numbers for medical and pharmacy students (about 82 percent). The average amount borrowed was $40,000, with some medical degree-seekers taking out loans in the upward range of $119,000.

Since 2002, the average amount of student debt has increased at a steady rate of about 5.6 percent, almost double the average rate of inflation. According to FinAid, the total current student loan debt exceeds $950 billion, which is slightly higher than the amount of credit card debt in the county. Student loan debt supposedly increases at a rate of about $2,850 per second. With so many students graduating with loans (some estimate about two-thirds), and with such a large outstanding balance of debt, many people are pressed to fully repay their debts. As a result, the rate for students defaulting on student loans rose drastically to about 8.8 percent in 2009, up from 7.0 percent in 2008.

Furthermore, the Economic Policy Institute points out the job market for graduating students under the age of 25 is competitive, with the unemployment rate rising to 9.3 percent, up from 5.4 percent in 2007. For the average student who borrows roughly $26,000, the average monthly loan payment is $275, which is a difficult sum to accumulate without a job. Thus, the Department of Education explains, roughly 14 percent of all students default on their loans within three years of their first payment period.

For students looking to minimize student loan debt, the clear choice is to shop smarter. Schools and education should be viewed as businesses, especially in terms of debt. If students find themselves borrowing more than $10,000, they should switch schools. They should also take out federal loans first, as these usually have better rates and payment plans, and are usually subsidized. Likewise, students should not borrow more for the full cost of their education than their anticipated starting salary, since any more than that will be difficult to repay. Finally, students should learn to live more sparingly and borrow less in other aspects of their lives. By cutting credit card spending and living more humbly, students can greatly ease the amount that needs to be repaid after college.

Whether or not going to school is worth being in debt is dependent on the student as well as their intended occupation. For instance, it seems that it’s more worth it to go $100,000 in debt to become a doctor than a kindergarten teacher. However, more and more frequently, students find themselves overloaded with debt that they are unable to repay. Thus, for some people, going into debt to get an education is the newest form of monetary slavery. Again, whether or not a student goes into dept depends entirely on the student’s anticipated career path, but if a student shops around they can still receive a good education while avoiding extensive debt.

Deworming Student Loans

Gail Collins talks sense about student loans–

Let us stop here and recall how the current loan system works:

1) Federal government provides private banks with capital.

2) Federal government pays private banks a subsidy to lend that capital to students.

3) Federal government guarantees said loans so the banks don’t have any risk.

And now, the proposed reform:

1) The federal government makes the loans.

Wow. You really do wonder why nobody came up with this idea before.

This is one example of corruption under the banner of privatization. There’s a big mess to clean up– let’s hope that this year’s freshmen will not be burdened by unreasonable interest rates on their loans when they graduate.

In related news, Parasitical Worms Afflict American Health Care. There’s a lot of this going around.

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