The Student Loan Average Loan Jumps to $27,000
As of 2013, college seniors in the United States graduated with an average loan of nearly $27,000, based on the report released by the Institute for College Access and Success. With the rise in college tuition and a challenging job market, the total number of students with an existing loan continues to increase.
In fact, the average loan debt in 2011 was 5 percent higher than in the previous year. To make things worse, it was in that same year when about 8 percent of college graduates suffered from unemployment, while 19.1 percent of those without a degree also failed to land any jobs.
A majority of the graduating class of 2011 entered college before the recession period in the country, which left thousands of families being unable to pay the massive expenses linked with getting a higher education. Ironically, a high percentage of public universities and colleges have hiked their tuition and fees due to state budget cuts. Despite all of these alarming issues that college students and their families have experienced, the increase in federal financial assistance added to the growth of loan debts.
Factors that Affect Student Loan Debts
In this tough economy, most people believe that having a college degree remains as their best bet for landing a decent-paying job. However, the rising debt levels prevent more and more students from pursuing higher education to get a degree.
According to experts, the amount of loan debt that a student incurs upon graduating from college depends largely on the school. In a study that included 1,057 colleges in the United States, the average debt for each student ranged between $3,000 and $55,000. It was also noted that graduates from 114 of these colleges had incurred a debt of over $35,000, and over 90 percent of college seniors from 64 other schools graduated with massive debts.
With this in mind, the cost of living in a specific area, availability of financial assistance and high tuition and fees all add up to the specific amount of debt that college students incur. Thus, it is important to understand that debt levels vary even among schools that seem to be similar in terms of the quality of education provided.
Students and their families should take into consideration these factors that affect the overall amount they need to allot before they choose a particular school where they could pursue their higher education.
For instance, Clarion University and the Indiana University of Pennsylvania are similar in the sense that they are both public schools that offer 4-year courses in college, and the annual fees and tuition reach about $7,500. However, those who graduated from Indiana University of Pennsylvania obtained an average loan debt of over $32,400 while graduates from Clarion University had a lower average debt of about $3,800.
Some schools fail to submit data, so there is no sufficient information to rank all colleges in the country in terms of debt. Nevertheless, the Project on Student Debt was able to highlight a number of high-debt and low-debt schools in the United States. In 2011, schools that were considered as “high debt” or colleges with the highest debt loans of about $31,000 to $46,000 included La Salle University in Pennsylvania, Franklin Pierce University in New Hampshire, Kentucky State University, and Morgan State University in Maryland. Graduates from Franklin Pierce had an average debt of $44,700, which is much higher than the $36,200 average loan debt of students from Kentucky State.
On the other hand, schools that were noted to have the lowest average student debts of about $3,000 to $9,700 included Yale University in Connecticut, Berea College in Kentucky, Williams College in Massachusetts, College of the Ozarks in Missouri and Pomona College in California. Pomona graduates were $7,400 in debt while Yale graduates owed about $9,200.
In addition, the amount owed by students varied from one state to another, with the rates ranging from $17,000 to $32,400 in 2011. New Hampshire students had the highest average debt at $32,400, and college graduates from Pennsylvania ranked second with $29,900 loan debt. States with the lowest debt levels included Hawaii and Utah at about $17,000 each. To sum up the reports, Northeast and Midwest graduates had the highest rate of debts while students from the Southern and Western states had the lowest amount of debts.
Financial Crisis among College Students and Graduates
Half of all private and public nonprofit schools that offer four-year courses in the United States represented the 1,057 schools that participated in the study. However, it is possible that the actual debt is higher than the one reported in the study because data are reported voluntarily by these colleges. Hence, this means that the financial issue among graduates is certainly more alarming than it has been in the past years.
At least one-fifth of the total amount owed is obtained from private student loans, and these are considered as even more expensive and more risky than federal loans. As more and more students accumulate more debts, they encounter greater problems in repaying these. In fact, the Department of Education reported that in 2011, the percentage of borrowers who failed to pay off their federal loans within two years of initial payment reached 9.1 percent, as compared to 8.8 percent in 2010. Hence, there is a possibility that the issue on student loans will be a huge factor in the country’s financial crisis.
Growing Concern about Student Loan Debts
In 2005 and 2007, the delinquency rate reached 12.4 percent. Loans that were taken out after October 2010 were reported to have a high delinquency rate of 15.1 percent, based on the study from FICO. The organization also claimed that student loan debt is even higher that auto loan or credit card debt, as it reached more than $1 trillion in 2011, while the credit card debt was at $798 billion.
Thus, the problem with student loan debts continue to plague millions of families and college students in the country. While credit card debts and auto loans are being paid off, a huge chunk of the U.S population rack up on student loans. Thus, the government continues to face great challenges in resolving this alarming concern that affects not only the youths of the country, but the U.S economy, as well.