Student Debt Soars Again (and 6 Steps to Fix This Mess)

Schools whose students have low graduation rates and struggle to pay back their student loans should be held accountable, a new report recommends.

This post comes from Brianna Ehley at partner site The Fiscal Times.

College graduates are sinking in a sea of student debt that just keeps getting deeper.

The Class of 2012 graduated with an average of $29,400 in debt, up from an average of $26,000 for the class of 2011, according to a new report from the Project on Student Debt at the Institute for College Access & Success.

The reason they’re borrowing more: While the recession has left families’ income levels flat, tuition just keeps climbing.

Average public university tuition and fees increased by 4.8 percent last year to $8,655. And that doesn’t include the rising costs for room and board, food, books or other necessary expenses.

With household incomes remaining flat – the median wage in 2012, at $26,984, was at its lowest level since 1998, according to the Social Security Administration – parents are covering less of their children’s college expenses than they had before, prompting students to borrow more.

Last year, parents covered 27 percent of college costs, compared with 37 percent in 2010, according to a report from student loan giant Sallie Mae. The average debt load for students at graduation increased by 6 percent a year from 2008 to 2012, the Project on Student Debt report found.

Students and grads are struggling with that heavier debt burden. Of the more than $1.2 trillion in outstanding student debt, a third of borrowers are either in default, deferment, or having payments postponed, according to an analysis by the Consumer Financial Protection Bureau.

That is likely explained by the poor job market and relatively high unemployment rate for new graduates. Still, the new report notes that young adults without a college degree face far worse job prospects than those with diplomas.

“Despite discouraging headlines, a college degree remains the best route to finding a job in this tight market,” Lauren Asher, president of the Institute for College Access & Success, said in a statement accompanying the new report. “But students and families need to know that debt levels can vary widely from college to college.”

In its report, the institute recommended six steps for addressing rising levels of student debt:

1. Reduce the need to borrow

The organization called on Congress to double the maximum Pell Grant and consider measures “to ensure that new federal dollars supplement – rather than supplant – state and other forms of higher education funding and financial aid.”

2. Improve understanding of college costs and financial aid options

The group recommended several ways to give consumers better data tools and comparative information about the real cost of attending specific schools. That would help students shop for schools.

3. The government should collect better data

President Obama has proposed a ratings system to help consumers compare the value of different colleges. “The success of the president’s proposal to rate colleges based on access, affordability, value, and student outcomes will depend on the quality of the data used in the ratings, underscoring the urgency of gathering better information,” Debbie Cochrane, the institute’s research director, said in a statement. The report recommends that the Department of Education collect some data directly from lenders.

4. Create consequences for colleges

Schools with relatively low graduation rates or ones that consistently produce students who struggle to pay their loans should have some accountability, the report says. “We recommend more closely tying a college’s eligibility for funding to the risk students take by enrolling and the risk taxpayers take by subsidizing it, with rewards for schools that serve students well.”

5. Reduce reliance on private loans

Those loans account for 20 percent of debt for recent grads and are typically more costly, with fewer consumer protections attached, the report says.

6. Improve awareness of federal repayment options

The default rate on federal student loans is the highest it has been in 16 years, but income-driven repayment plans are available that can make student debt more manageable. Those plans can be improved and better publicized. “The administration recently announced additional steps to promote awareness of income-driven plans and ease enrollment,” the report finds, “but much more needs to be done.”

More on The Fiscal Times:

Stacy Johnson

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  • ron

    What they need to do is cut the pell grants and lower the people that go to college. It is the supply and demand right now with all the give away programs there are too many people in college if they would lower the kid that go to college the colleges would have to cut the rates to compete with other colleges .

    • Kim Hellman

      I hope you mean that the trade industry would need to take up the slack with certification programs. With increasing minimums competing with increasing expenses, what is the average person supposed to do? The school systems have realized that kids are not college ready and even with AP courses accomplished, students are taking remedial classes their freshman years…or failing out because they are under prepared. There should absolutely not be a lessening of students that are college bound because of the students that finish higher education, few get a degree that is anywhere near the field they studied (ie. I have an art degree and work in a public school…but not as an art teacher). My husband is working on his undergrad in mech engineering. He attends a public university. Our pell is never enough to go without a substantial loan and the loan is often greater on the unsub side than the sub (unsub your interest just keeps on building, sub you get a break on interest while enrolled/on your taxes). As non-traditional students, both working full-time and with 3 kids, we are deep in student loan debt–under 50k but still over what would make our lives more comfortable. We pay our bills, save as much as we can, do not carry credit card balances, have limited revolving debt. Our burden is our student loans. It affects our ability to rent affordable housing, to buy and to spend what we make to make ends meet. 10 years ago, our jobs paid what we needed to get by and we were comfortable…then the costs of living went up and our paychecks didn’t…we didn’t have a choice but to return to school and change our money making power. Because we are paying for school ourselves (our parents are off the hook), with the help of grants, loans and savings, we don’t have money for much else. For example, I finished college in 2008 (yay for economic timing!) and my loans at a private college–chosen because of the amount of money the school was willing to offer and a scholarship for my previous grades–are half the amount in the same 2 year period that my husband is experiencing at a public university. The increase in tuition, the cost of books ( even buying them on Amazon and selling them when you finish), paired with increasing rents and decreasing lending availability has made it that much more difficult for us to buy an affordable home. Thankfully, we have been approved for a traditional mortgage and thankfully our resolve and persistence to finish our degrees is helping us compete. I work at a Title I elementary, the languages learners are at 50% and the income level is 90% free/reduced for lunch. We absolutely encourage them to prepare for college. To make choices that will ready them to work hard and to take advantage of programs every step of the way to bring them out of their current circumstances. Supply and demand is for jobs. The colleges and universities should be competing for the children we are preparing to take over this country. Our future generations depend on jobs and the jobs that pay for good old fashion pay check to pay check, require education of some level/training. Parents are focusing more on retirement as their options for old age dwindle, it is only fair that students have the resources they need to be successful, too. Or what is the alternative? What is the suggestion? What is the expected circumstance?

      • ron

        Just a note I talked to a someone that worked for a publisher. He was telling me the big cost in books is it has to be approved by all the groups twice. Example the right wing has to look at it and then the left wing, then the women group ,etc. and after they make changes they have to do it again till all the groups have their say and does not offend them does not matter if it fact just so it does not offend. And thee are not enough jobs out there for that many people with a college education that’s why they are working for 10 dollars an hour

    • Chris Schodrowski

      So basically if your family cannot afford to send you to college you don’t get help and don’t go to college. The rich get richer and the poorer stay poorer.


    I don’t know how much of a role any government entity can have in slowing the increase of tuition, but it is needed. My wife is in a masters of higher education program and she was incredulous when she heard similar stats (similar to some in this post) about how the growth of average household income has lagged way behind the growth of college tuition. We are approaching 30 and are just now paying off our student loans. I wish someone had a candid conversation with us about what taking on all that debt would really cost us. Tuition is also increasing because schools have to offer so much to their students beyond the classroom. Top notch facilities come at a high cost and more new student tuition is needed to pay for them.

  • Bob K

    The primary reason for above inflation increases in tuition for the past ~40 years, is that states are rapidly removing/withdrawing funding. In the 80s, ~45% of public university budgets were provided by the state, that is down to ~20% (10 to 15% in California and Illinois) and it will be zero in ~25 years. That is why tuition has increase faster than inflation at public universities and that is why it will continue for the next ~25 to 30 years. It is certainly NOT the ~1.5% per year average raises faculty at public universities have received over the past ~30 years.

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