Got Student Loans? You’re Not Alone!
October 25, 2011 Leave a comment
USA Today recently dropped a headline bombshell. Student loans taken out last year topped $100 Billion last year (first time this has happened). In addition to that staggering number, a Federal Reserve report indicated that total outstanding student loans are about to exceed $1 Trillion. (That figure is higher than Americans, the credit society, owe in credit card debt.)
Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what’s owed on home loans and credit cards.
The amount of student loans has continued to increase as the cost of college education continues to skyrocket. But, one student warns, today’s lending with have long-lasting effects.
“It’s going to create a generation of wage slavery” Nick Pardinin, a Villanova grad student, told USA Today. Pardini warns that student loans will be the next credit bubble, but students will be on the hook, not lenders (most student loan debt cannot be discharged, even in bankruptcy).
Are students borrowing more than they need? FinAid.org‘s Mark Kantrowitz thinks so, and he told USA Today that it leads to “delaying life-cycle events such as buying a car, buying a home, getting married (and) having children.”
With more and more college grads in the unemployment line, student loan defaults are on the rise an expected to rise. Student loan borrowers need to take heed and avoid defaulting. For federal student loans, a number of options are now available to provide relief.
Republican presidential hopeful and Texas Senator Ron Paul recently came out against student loans, saying he’d end federal student lending program if elected president. Paul says that the availability of aid has caused the cost of higher education to go up. Politico reports:
“Just think of all this willingness to want to help every student get a college education,” said Paul, who graduated from Gettysburg College in Pennsylvania before earning a medical degree at the Duke University School of Medicine. “I went to school when we had none of those. I could work my way through college and medical school because it wasn’t so expensive.”
In May, NPR asked whether going in to debt for college was worth it. The overall answer, according to Kantrowitz, it depends.
“It’s smart if it’s enabling you to invest in your future. But if you borrow more than your expected starting salary after you graduate, you’re going to struggle to pay your loans.”
That is not to say don’t become a doctor if you want to work in a low-income community or don’t become a lawyer if you want to be a public defender. Other options do exist to help students in public service fields with high student loan costs.
Kantrowitz offers the following tips for keeping student loan debt minimal:
- Save before going to college.
- Apply for scholarships.
- Apply for federal loans before applying for private loans.
- Think hard about your major. If you don’t expect your starting salary after graduating to match what you borrowed, consider a less expensive college.
- Double major in a more lucrative field.
- Pay interest while you’re in school.