Course loads may be tough enough these days, but the cost of getting a University education makes things even tougher. Students today are increasingly relying on borrowing large sums of money to pay for higher education, often leading to massive debt.
According to Oregon Student Public Interest Research Group’s statistics, about two-thirds of all students take out loans to pay tuition and living expenses. In 1993, 46 percent of college students graduated with debt. In 2004, the figure was 62 percent for public university students and 74 percent for those attending private schools. About 8.5 million college students and parents took out $67 billion last school year in federal and private loans.
“It used to be common in the nineties to see students with $3,000 to $4,000 in debt, but now that’s number gone to $30,000 to $40,000,” said Counselor Mike Whitten at the Eugene branch of Consumer Credit Counseling.
Whitten said that most college graduates with large debt are able to find work fairly quickly and make their loan payments, but problems start happening a couple years after graduation.
“They make their payments on time, especially when people are just out of school and making some money,” said Whitten. “But then something happens and they lose their job, and they are put in a position to handle the payments on less income.”
According to the College Board’s annual report on nationwide college pricing, federal loan programs have not kept pace with tuition increases and inflation. In each of the federal student aid programs, aid per student was lower in inflation-adjusted dollars in 2005-06 than it had been earlier in the decade. In 2005-06, the U.S. Department of Education awarded fewer Pell Grants, the lucrative program for low-income students, and also decreased the average amount given to each Pell Grant recipient.
For many students, a deceptively easy alternative is always available: taking out private loans from an abundance of eager lenders. Using more aggressive means to advertise their services to students, private lenders are doling out more money than ever before to students, and they expect to reap huge profits once those students enter the professional world.
According to the College Board, students took out nearly $13.8 billion in private loans in 2004-05 – more than 10 times the amount borrowed a decade ago. For many students, going to private lenders is the only available option to pay for a college education. While offering steeper interest rates than government loans, the private lenders offer more money, faster, and more students are turning to private lenders than ever before.
“The short version is that federal student aid has not increased while tuition has increased at twice the rate of inflation,” said Christopher Penn, an online writer and podcaster for Financial Aid News. “You have this incredible gap between federal aid and the cost of attending college.” On his weblog and podcast, Penn has suggested that federal funding for education could increase now that the Democrats control both houses of Congress. Lowering student loan interest rates was part of the Democrats’ midterm election agenda. If such changes were enacted, the cost to the Treasury is estimated to be $18 billion or more over five years.
“I do believe there will be an impact with Democrats in control of Congress, but I don’t know how much of an impact it will be,” Penn said.
He said that when it became clear in the final days before the midterm election that Democrats would likely win control of both houses, the usually Republican-friendly private lending industry lobbyists started a blitz campaign to reach out to influence Democrats. With more lobbyist money flowing to Democrats, Penn was skeptical of how much change the party would be willing to support.
“Education is about the last edge we have in the world economy,” Penn said. “If we give up on education, we’re already setting ourselves up for failure.”