Student loan debt outpaced credit card debt for the first time last year and is likely to top $1 trillion this year as more students go to college and a growing share borrow money to do so.
While many economists say student debt should be seen in a more favorable light, the rising loan bills nevertheless mean that many graduates will be paying them for a longer time.
“In the coming years, a lot of people will still be paying off their student loans when it’s time for their kids to go to college,” said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.
Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges.
The mountain of debt is likely to grow more quickly with the coming round of budget-slashing. Pell grants for low-income students are expected to be cut, and tuition at public universities will probably increase.
Some education policy experts say the mounting debt has broad implications for the current generation of students.
”If you have a lot of people finishing or leaving school with a lot of debt, their choices may be very different than the generation before them,” said Lauren Asher, president of the Institute for Student Access and Success. “Things like buying a home, starting a family, starting a business, saving for their own kids’ education may not be options for people who are paying off a lot of student debt.”
To be sure, many economists and policy experts see student debt as a healthy investment — unlike high-interest credit card debt, which is simply a burden on consumers’ budgets and has been declining in recent years.
”College is still a really good deal,” said Cecilia Rouse, of Princeton, who served on President Barack Obama’s Council of Economic Advisers. “Even if you don’t land a plum job, you’re still going to earn more over your lifetime, and the vast majority of graduates can expect to cover their debts.”
Even believers in student debt like Rouse, though, concede that hefty college loans carry extra risks in the current economy.
”I am worried about this cohort of young people, because their unemployment rates are much higher and early job changing is how you get those increases over their lifetime,” Rouse said. “In this economy, it’s a lot harder to go from job to job. We know that there’s some scarring to cohorts who graduate in bad economies, and this is the mother of bad economies.”
By Tamar Lewin