Student loan debt on the rise, says report

Student Loan Debt

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Student loan debt is on the rise, according to a report released Nov. 27 by the Federal Reserve Bank of New York.

In its Quarterly Report on Household Debt and Credit, the bank announced that outstanding student loan debt has increased to $956 billion in the third quarter of the 2012 fiscal year — an increase of $42 billion from the previous quarter.

“One reason (student loan debt) has risen is that states are still under enormous fiscal pressure to cut state funding, which means that tuition and fees continue to rise,” said UC Berkeley professor of public policy Robert Reich. “That in turn requires that students take out more debt.”

Of the $42 billion rise this quarter, $23 billion came from new debts while $19 billion came from previously defaulted upon student loans.

But the report may be somewhat misleading because it lumps private loans and federal loans together, according to Pauline Abernathy, vice president of the Institute for College Access & Success. Private loans, provided by private lenders like commercial banks, are a riskier way to pay for college than federal loans, which include benefits like flexible repayment options for students and debt forgiveness programs, Abernathy said in an email.

Despite rising student debt levels, Reich said going to college is still a sound investment for students.

“The lifetime earnings of college graduates are still 50 to 60 percent higher than the lifetime earnings of someone with just a high school degree,” he said. “There’s no question that, for good or ill, a four-year college degree continues to be the gateway to good-paying jobs in America.”

Contact Andy Nguyen at [email protected].

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  • The average student loan debt is apparently around $26,000. Each family share of the national debt is over $122,000 (no need to count all of it, the debt doesn’t need to be zero, maybe just 50% of what it is now), and as college grads earn more, they are actually more likely to fall into the small % of taxpayers who pay enough to actually contribute to paying off the debt (assuming congress ever cuts spending to get the debt down to a sustainable % of GDP). So student loan debt is not a big deal. It’s an investment on the part of the students, they should bloody well pay it off (I did). Kids should be more concerned about the debt being left them by the current voters.

  • It was inevitable. Rising cost of education, inflation, unemployment and top of all, government’s indifferent attitude towards these are the major reasons behind sky high student debt. I though really appreciate President’s effort to lower student debt. But can someone tell me the percentage of students qualifying for IBR or other student debt forgiveness programs?