Student loan debt tops trillion dollars
By Kalea Hall
Today, students will walk into class, sit down to learn and may not think of what’s to come after they walk onto a platform or stage to accept their degrees: student loan debt.
Not all students will have the debt, but Edvisors.com, an informational source for students and parents looking to plan and pay for college, says 71 percent of students graduate with debt.
The fix: More investment from the federal and state level, says Mark Kantrowitz, of Edvisors.
“There is no magic bullet that is going to solve this other than the federal and state governments investing more,” he said. “This is an investment in the future of the country.”
Nationwide, $1.3 trillion in federal and private- education debt is owed. The average student-loan debt is $35,000 at graduation for bachelor’s degree recipients this year. That’s up from the average of $19,669 ten years back.
“It’s where the debt is out of sync with the income when [graduates] get into trouble,” Kantrowitz says.
The effects of racking up student-loan debt are difficult to directly point out. Young adults may be turned off from buying a house, but there are other factors that affect large investment decisions such as the state of the economy and low wages.
But there is a delay in first-time home ownership.
“The economic impact is the recovery isn’t as strong as it would have been,” without the high amount of debt U.S. graduates have, said Mekael Teshome, PNC economist.
There has been speculation that the delayed home ownership will lead to the next housing bubble, but Teshome doesn’t think so and he doesn’t see student-loan debt leading to a recession.
“With student loans, they are return on investment,” Teshome said. “You will get a better job with your education.”
Cleveland-based Economist George Zeller also sees student-loan debt affecting the nation’s recovery from the recession. Young adults are the most unemployed age group in the nation. The seasonally-adjusted unemployment rate for those 20-24 was 8.9 percent in August compared with 3.9 percent for those 45 to 54, according to the U.S. Bureau of Labor Statistics. The unemployment rate for those 25 to 34 years was 5.3 percent in August.
“It is not speeding up the recovery,” he said. “We are just making the incentives in the future that we need to be making. There are too many things we are doing to slow things down.”
Zeller also believes the investment needs to come from federal and state funds.
Colleges, Kantrowitz says, have too many expenses and only at the cost of affecting a quality education would they be able to cut back.
“There really isn’t much that colleges can do that they haven’t already done,” he said. “These colleges don’t have any secret resources they can tap into.”
College scholarships and grants should be the focus for students to help control debt, he said.
“The only way to avoid student loans is not to go to college at all, and if you didn’t do that you wouldn’t have loans but a lower income,” Kantrowitz said.
Scholarships from the private sector have increased to $6 billion and about 1 in 8 student receives scholarships to pay for school.
“Very few students [receive] a completely free ride each year,” Kantrowitz said.
He also calls for better disclosure about the true cost of college and more financial literacy training.
“The best way to reduce costs is to attend a lower- cost college,” he said.