Is Student Loan Debt Really A Problem?
With all the media coverage about the massive problem of student loan debt, you might be surprised to learn that one third of all 2008 college graduates in the US managed to get out of college without owing a cent.
These figures are included in Who Borrows Most? Bachelor’s Degree Recipients With High Levels of Student Debt, a 2010 study by the College Board that assessed 2008 data. That year, the median college student debt level clocked in at just under $20,000—it’s gone up to over $23,000 since then. But according to the report by the College Board, only 10% of all college graduates owed more than $40,000 in debt—not counting student credit card debt and other non-educational loans.
So is student loan debt still a problem? There are several reasons why it should still be considered a worry.
Because high levels of debt One of the most troubling pieces of information in the report involved the fact that high debt levels were most often found with graduates of for-profit schools. 53% of for-profit school graduates in 2007-2008 carried debt loads of $30,500 or more—much of it in private loans. For-profit schools often disproportionately target low-income students, who are typically nontraditional—they tend to be working parents who need professional degrees to advance in their careers, and the flexibility of for-profit online schools appeals to them. The study suggests that some of those graduating with the most debt may also be the most financially vulnerable.
Because high debt levels were found among independent students
were found among for-profit institutions
Because for-profit students were also the most likely to have private loans
Private loans are a problem because their interest rates are variable and much higher than federal loans. This data is troubling because it suggests that many for-profit college students who come from more vulnerable financial brackets are also saddled with the more expensive types of student debt—even if they qualify for more in federal student loans. This is possible because for-profit schools often have tuition rates too high to be covered by federal aid alone—in contrast to community colleges, for example.
Because community college may not be as affordable as you’d think
The studies showed full-time community college students also had a hard time covering costs without borrowing. There was a big jump in borrowing by community college students between 2004 and 2008—from 30% to 38%.
This may be because government aid didn’t keep up with tuition increases during this time. In addition, incomes declined, textbook costs climbed—and before the economy crashed, student loans were easy to get.
In addition, the cost of living went up during that time. According to an article in MSN Money, health care and energy costs rose during that period as well—so community college students were left with a gap of thousands of dollars between what the government estimated they could afford and the actual bills they had to pay.
Because the extremes are telling
According to the report, approximately 5% of associate’s degree graduates who went to public community colleges got out of school with over $30,000 in debt. With the average community college at the time costing a little over $7,000 per year including college textbooks and other expenses, this statistic is puzzling. It’s also troubling—as associate’s degree students often have fewer lucrative job prospects than those with a bachelor’s degree.
The student loan debt landscape may not be what we think it is. But student loan debt is still a problem for millions of students—and many believe the system is overdue for reform.
US News & World Report: Is Student Loan Debt Really a Problem?
College Board: Though Still in the Minority, Crowing Percentage of Bachelor’s Degree Recipients Graduate with High Levels of Debt
College Board: Who Borrows Most? Bachelor’s Degree Recipients With High Levels of Student Debt
MSN Money: Is Student Debt Really a Problem?
More About Understanding Student Loans
- Credit Repair Services You Should Never Pay For
- Questions You Should Ask Before Applying for Student Loan Forbearance
- The Bank on Students Act: What It Is, and How It Could Help Student Borrowers
- How the Death of a Co-Signer Can Affect Your Student Loan
- Peer-to-Peer Student Loans: What They Are, and How They Can Help You Pay for College
- If You're Unable to Work Because of a Disability: What Happens to Your Student Loan?
- New Rules for Debt Collectors: How They Could Affect Your Student Loan
- Having Trouble Repaying Loans? The Department of Education May Be in Touch