On July 1, 2012, federally subsidized student loans could see their interest rates double. The extra $2,800 dollars this would add to the average borrower’s debt is part of a much larger crisis in student debt. This year, outstanding student debt is expected to reach over $1 trillion dollars for the first time ever, after students took out a record-high more than $100 billion in loans last year.
Not only are students borrowing more money to finance their education, but more students are being forced to take out loans. Americans now owe more money on student loans than they do on credit card debt. This landmark is made even worse due to the fact that student debt is more concentrated — the amount owed on credit cards is spread out amongst a much larger proportion of the population than is student debt.
According to the Higher Education Research Institute’s College Senior Survey in 2009, only 41% of graduating seniors were able to report that they hadn’t borrowed any money to fund their education. This data is corroborated by American Student Assistance (a nonprofit organization focused on student loan solutions), which reports that 60% of bachelor’s degree recipients had to take out a loan between the 2001 and 2007 academic years.
But the thing that makes student loans worse than other kinds of debt is this: They cannot be gotten rid of, even if a debtor declares bankruptcy. This factor clearly has a considerable impact on the growing number of defaults on student loans.
So what does all this mean for your average college student? It means that we are now struggling more than ever to find a way to pay for our education, just as it is becoming increasingly important to have a college degree. And as pressure is mounting for students to excel academically, many simply don’t have the time to “work their way through college” as students of previous generations have done.
Furthermore, the harsher terms of student loans (more and more of which are being privately funded) are causing students to feel pressed to graduate in fewer semesters to avoid incurring additional tuition costs which would in turn require more loans. Based on personal observation, more students are now beginning to take 18 credit hours each semester instead of the standard 15 for this reason.
So while Congress is debating whether or not to extend the lower interest rate on student loans, student debt is growing exponentially. (Average debt amongst graduating seniors has risen to an all-time high of nearly $25,000.) Based on the increasing severity of the situation, not only does the initiative to keep interest rates low need to be passed, but significant measures need to be put in place to help alleviate the alarming amounts of debt among college graduates. If something isn’t done to diffuse the situation soon, the high levels of student debt could have long-lasting negative impacts on our economy for years to come.
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