Written By Anne Marie Chaker
Posted By Michael Rivezzo
Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.
New numbers from the U.S. Department of Education show that federal student-loan disbursements — the total amount borrowed by students and received by schools — in the 2008-09 academic year grew about 25% over the previous year, to $75 billion.
The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama’s proposed 2010 budget.
The sharp growth is “definitely above expectations,” says Robert Shireman, the deputy undersecretary of the Education Department. “But we’re also in an economic situation that nobody predicted.” The eye-opening increase in borrowing is largely due to the dire economic environment, which is causing more people to seek federal loans, he says.
The new numbers highlight how debt has become commonplace in paying for higher education. Today, two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate, according to an analysis of the government’s National Postsecondary Student Aid Study, conducted by financial-aid expert Mark Kantrowitz.
Only a dozen years earlier, according to the study, 58% of students borrowed to pay for college, and the average amount borrowed was $13,172.
The ripple effects for today’s heavily indebted young people are becoming palpable. A growing body of research suggests that tough loan payments are affecting major life decisions by recent graduates, forcing them to put off traditional milestones, from buying a first home even to marriage and having children.
Ironically, the rising levels of borrowing may be contributing to the accelerating cost of college, some college finance experts say. Loans can give colleges an artificial sense of a family’s ability to pay tuition. To some extent, that false sense of security gets built into the assumptions schools make when setting prices, say experts. The idea is that as prices rise, families borrow more and more, spurring prices to rise further, which in turn requires more borrowing.
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I feel that the reason students need to borrow so much to pay for college is a) because the cost of living (tuition, room and board etc) is on the rise and b) parents have either spent or failed to save enough money to help their kids in continuing their education.
ReplyDeleteI believe that the government needs to be a little more pervasive and wiser in how they help students financially, as they realize why so many individuals are deep in debt by their mid twenties. All the students who had earned enough income through part time jobs yet were still considered dependents fell through the "cracks" when economic stimulus rebates were given. Really, their economic stimulus failed because the individuals that actually received the rebates were more apt to save than spend. What poor, poor planning.
Above posted by Lisa Matthys. (Sorry, I forgot to put my name on the comment.)
ReplyDeleteAs an SU student who will have a substantial amount of loans to pay back when I graduate, its shocking how fast the costs of a college education are rising. The costs to attend a private institution is becoming so high, future college students might settle for state and local colleges to reduce the amount of loans that they would need to take out.
ReplyDeleteCommented on by Albert Tirado
since financial crisis, it is getting hard to pay tuition(epecially SU's tuition is a lot more than other public schools..) and also hard to get a scholarship too
ReplyDeletecommented on by Minjune Kim
Many student and their parent are not capable for that expense for the study. They are don't know about it and not saving more money. But they need more money for that study as well as living, room charges, etc. I think it's primary expense for every student.
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