Rising Student Loan Debt Testament to Decreasing College Affordability

Over the last 10 years, not only have more undergraduate and graduate students been taking out student loans to pay for school, but they’ve been borrowing exponentially more.While some authorities in higher education and financial aid attribute this trend to students becoming overborrowers – maxing out their federal college loans and adding on private student loans just because they can – others say the increase in reliance on student loans is due to the fact that college affordability has moved increasingly out of reach.”It used to be that, 10 to 20 years ago, if you went to a four-year public institution, had a low to moderate income, and worked a reasonable amount part-time in school, there was enough aid and public institutions were better financed, so you could come out with no debt,” Lauren Asher, acting president of the Project on Student Debt , told The Chronicle of Higher Education. “That same student now would have to borrow to get their education.”Tuition Keeps Rising, Students Keep BorrowingCollege costs have soared in the past decade at both public and private institutions, with college students across the country being subjected to near-yearly tuition increases. In just the last year, even as unemployment has soared and retailers and service providers in every sector – from airlines to car dealers to clothing stores – have slashed prices in response to diminished consumer spending and contracting sales, tuition and fees at both two-year and four-year colleges and universities have continued to rise.For the 2008-09 academic year, according to the College Board, in-state tuition and fees at four-year public institutions were up, on average, by 6.4 percent to $6,585, compared to the previous school year. Out-of-state tuition and fees were up by 5.2 percent to $17,452. Tuition and fees at public two-year colleges rose by 4.7 percent to $2,402, and at four-year universities by 5.9 percent to $25,143.Student borrowers have had to adjust accordingly.In 1993, fewer than half of graduating college seniors had taken out student loans to finance their undergraduate education, according to the Project on Student Debt. By 2003, that number had climbed to over 65 percent. For the students graduating with student loans, the average student loan debt amount more than doubled in those same 10 years, jumping from $9,250 in 1993 to $19,200 in 2003.Today, about 8 percent of undergraduate students currently carry college loans in amounts more than double the national average.Borrower Education Lacking for Student LoansPart of the problem, financial aid experts say, is that many students pay little attention to their college costs and how much they’ll need to borrow in student loans to cover those costs, particularly when it comes to attending their dream school.”They want to be able to pay for the school they have wanted to go to for as long as they can remember,” says Mark Kantrowitz, publisher of FinAid.org, a student financial aid website. “And they are willing to do whatever it takes.”And rarely do these students get advised otherwise. Students receive little, if any, education from high school guidance counselors or college financial aid administrators about the financial aid process or the realities of student loan repayment. Often, students graduate without knowing what type of college loans they’ve taken out, how much student loan debt they’ve racked up, what their student loan interest rates are, or how feasible it will be to pay off their federal and private student loans with a job in their field.Despite Drawbacks, Student Loans Remain a Worthwhile InvestmentDespite this overwhelming increase in student loan borrowing, most economists and financial analysts maintain that the difference in lifetime earning potential between high school and college graduates more than outweighs the costs of a college degree.In 2007, the average college graduate earned about $57,200 a year, compared to the average high school graduate’s annual earnings of about $31,300 – a difference of over 80 percent. Over a lifetime, college graduates typically earn $1 million more than high school graduates.A student who graduates with $20,000 in debt from college loans should be able to make back at least that amount within one to two years in the additional earnings afforded simply by virtue of having an undergraduate degree, says Sandy Baum, a senior analyst at the College Board.The benefits of a college degree are even more noticeable in the current recession: Although job losses have hit both white-collar and blue-collar industries, the unemployment rate in May was 4.8 percent for 25-year-olds with bachelor’s degrees, compared to 10 percent for 25-year-olds who hold only a high school diploma.