In the summer, the federal and private student loan bubble hit the $1 trillion mark. The Consumer Financial Protection Bureau (CFPB) confirmed the figure and the astronomical debt loads are hitting those aged 39 and under.
On Thursday, The Institute for College Access & Success’ (TICAS) Project on Student Debt issued a report that highlights the specifics of the student loan crisis inflicting much of the United States. In a time of economic uncertainty and high unemployment levels, especially for the youth, college seniors who graduated in 2011 maintain an average of $26,600 in student loan debt in 2011, which is up five percent from the previous year.
Many of the graduating students today entered college when the recession began. This is troublesome, according to the report authors, because families have been having a difficult time being able to afford tuition rates. In recent months, public colleges have increased tuition in response to state budget cuts, while for-profit post-secondary institutions have also hiked tuition costs.
For students, it isn’t just tuition costs, but it’s a wide range of factors that contribute to the growing student loan debt, such as fees, financial aid and cost of living. It can also be the school you choose. Out of 1,057 colleges researched, the average debt per student is between $3,000 and $55,250, while at 114 colleges average graduates left school with $35,000 in debt.
“In these tough times, a college degree is still your best bet for getting a job and decent pay,” said Lauren Asher, president of TICAS, in a press release. “But, as debt levels rise, fear of loans can prevent students from getting the education they need to succeed. Students and parents need to know that, even at similar looking schools, debt levels can be widely different. And, if they do need to borrow to get through school, federal student loans, with options like income-based repayment, are safest [ways] to go.”
In comparison, Indiana University of Pennsylvania and Clarion University of Pennsylvania are both public four-year colleges and charge annual tuition and fees of roughly $7,500, but graduates from the former had $32,416 on average in debt and graduates from the latter had only $3,815 in student loan debt.
Meanwhile, schools with the lowest debt average (between $3,000 and $9,750) are: Williams College in Massachusetts, Yale University in Connecticut ($9,254), Pomona College in California ($7,540), College of the Ozarks in Missouri and Berea College in Kentucky.
It should be noted that all of the data was voluntarily submitted, which means that the figures are most likely higher than they appear.
What’s the solution? TICAS makes the argument for more federal financial aid. However, many free market economists suggest quite the opposite: stop federal and state loans completely. Those who advocate this position make the case that this will lower tuition rates across the country.
If a college charges $20,000 for a four-year degree and a student cannot afford such an enormous sum of money then that institution loses a student. Therefore, more and more students would not go to college and this would lead to these facilities to lower their tuition rates.
During the Republican primaries, retiring Texas Republican Congressman and three-time presidential candidate Ron Paul said during a November debate that “the policy of student loans is a total failure.”
“A $1 trillion of debt that will be dumped onto the taxpayer,” said the libertarian-leaning congressman. “What have they gotten? A poorer education and costs have skyrocketed because of inflation and they don’t have jobs. There’s nothing more dramatic failing than that program.”
Even Vice President Joe Biden blamed government for driving up the cost of tuition rates across the country, but he still defended the practice and abhors a free market solution to another government-created bubble.
“By the way, government subsidies have impacted upon rising tuition costs, but if we went the free market route, there’d be nine million fewer students in college today,” said the vice president, who spoke with Tallahassee students in February.