Student Loan Debt in the U.S. Approaches $1,000,000,000,000


Three days ago, I submitted the last of my graduate school applications. I was elated. I was relieved. I was … scared as hell.

In January 2012, President Obama lamented that, for the first time in history, Americans have incurred more student loan debt than credit card debt. Now the Pew Research Foundation is reporting that 19% of American households owe student loan debt (as compared to 15% in 2007). In households headed by persons younger than 35, that figure climbs to 40%. And, while the average student loan debt is $23,349, 10% of debt-holders owe more than $61,000.

Like our predecessors, most of us millennials were raised with the wholesome ideal of an “American dream” — the promise that, in this great meritocracy, hard work and education will yield upward mobility and financial security. We envisioned ourselves purchasing charming two to three-bedroom homes, driving snazzy new or used (environmentally sound!) cars, and hamming it up with our bosses at awkward holiday parties. We laughed when our grandfathers warned us that “anybody with half a brain and a library card can get a liberal arts degree,” and congratulated ourselves on our ability to endure the, er, taxing demands of a college schedule. 

Few of us imagined ourselves (or our friends) moving back into our parents’ basements, dejectedly Craigslisting entry-level jobs, and guzzling $4 bottles of wine to forget about our crippling student loan debt. And yet … and yet.

From 2007 to 2010, college enrollment spiked 11%. In 2009-10, over half of first-time undergraduates used student loans to fund at least part of their college expenses. On the surface, these numbers are encouraging. They suggest increased access to higher education and an opportunity for lower and middle-income students to obtain external funding sources.

What’s more, as unions deteriorate and the nation collectively waits for minimum wage increases, a four-year degree is all but essential for securing a comfortable middle-class lifestyle. The president himself has noted that "Higher education is not a luxury — it's an economic imperative."

Nonetheless, post-secondary education in America often comes with a hefty price tag. The Federal Reserve Bank has warned that the nation’s outstanding student loan debt is now approaching one trillion dollars.

Unfortunately, the burden of this debt falls squarely on the shoulders of those least equipped to carry it. The least wealthy quartile of Americans owes 58% of the country’s student loan debt. This is particularly alarming given that the mean household income in the United States has fallen from $91,275 in 2007 to $80,800 in 2010.

Our faith (albeit withering, at times) in the romanticized American Dream keeps us white-knuckling our belief that higher education is a wise investment. However, evidence suggests that today’s young Americans are embroiled in a lose-lose battle: damned if they strike out with only a high school diploma, damned if they rack up tens of thousands of dollars in student loan debt. This battle only intensifies at the graduate school level. In 2009-10, 69% of graduate students financed at least a portion of their education with federal loans. On average, Master’s students accrue over $50,000 in debt. For doctoral students, the number exceeds $77,000.

As many of us come to the painful realization that four-year degrees do not guarantee meaningful employment (oh, hey, humanities majors!), advanced degrees seem attractive, if not necessary. Be that as it may, as of July 2012, funding these degrees became much more difficult.

In an effort to save the nation’s under-resourced Pell Grant program (which provides nine million undergraduates grants of up to $5,500 a year), President Obama created a program that eliminates subsidized federal loans for graduate students. Previously, a person could borrow up to $20,500 a year through the Stafford loan program. Of that, $8,500 would be subsidized, meaning it did not accrue interest while that individual was still in school or for a six-month grace period after he or she earned a degree.

Now, however, all federal loans are unsubsidized, while still locked in at a 6.8% interest level. According to the National Association of Student Financial Aid Administrators, “A student who took out just the $8,500 a year in subsidized loans would have repaid $46,953 over the next 10 years … Unsubsidized loans would add an extra $6,385 in interest payments.” Interest rates on subsidized loans for undergraduates have already doubled to 6.8%, and many worry that soon their federal loans will be unsubsidized, as well.

Student loan debt is more than another monthly bill in the mailbox. It has the power to discourage lower- and middle-class adults from pursuing higher education, to dictate career trajectories, and, ultimately, to exacerbate existing class differences.

Are those of us who will likely take out massive loans crazy? Probably. Is it financially risky? Definitely. But we forge ahead, nonetheless, having convinced ourselves of long-term benefits — both real and perceived.