New figures from the Federal Reserve Bank of New York show that student loan debt has risen 8% from a year ago. Americans owed $904 billion in student loans at the end of March, as compared with the $679 billion they owed in credit card debt.
Overall, Americans are reducing their debt burden in a process called deleveraging: The Wall Street Journal says that total household debt, which includes mortgage, student, credit-card and auto loans, has declined by about 10% since mid-2008 when borrowing reached its height. As of March 31, total household debt was $11.44 trillion.
But student debt is going up, and quickly,
…in part due to higher tuitions, but also because alternative ways of paying for college—such as home-equity loans—have dried up. The Obama administration has expanded federal loan programs, which offer student loans at below-market rates. And, as usually happens in recession, college enrollments have surged as job openings have been scarce.
The Wall Street Journal also reports that more students are falling behind on their payments. Economists point out that this trend portends poorly for the future, as people postpone buying houses and starting families:
A rising number of student borrowers are behind on their payments; 9% of the total dollar amount of student loans is 90 days or more behind on a payment. Many new graduates are having trouble finding well-paying jobs even as payments come due, and a growing number of students are dropping out of school, meaning they are left with debts but no degree, recent research shows.
One student noted by the Wall Street Journal, 19-year-old Juan Urias, left a private institution, St. Joseph’s College in New York City, to transfer to LaGuardia Community College, where tuition is far cheaper. Financial aid now covers all of his tuition; had he stayed at the other school, he would have had to borrow about $5,000 and graduated (provided that he was able to finish in four years) with $20,000 in debt. “I know how bad it is going to be in the future. I can’t do it,” he says.
I teach at a small Jesuit college in Jersey City, New Jersey, that is similar to similar to St. Joseph’s: Small private nonprofit schools whose student bodies are from lower-income backgrounds have simply become too expensive compared to community colleges and what such private schools might offer — more attention to students, smaller classes — has become a disposable luxury.
Could college as we have known it become such a luxury?
Photo by Jagz Mario
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