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Report – The Student Debt Crisis

The Student Debt Crisis by Anne Johnson, Tobin Van Ostern, and Abraham White | October 25, 2012

  • “Higher education is an integral part of the American Dream. But today more and more young people increasingly have to finance their education through student loans. In the past three decades, the cost of attaining a college degree has increased more than 1,000 percent. Two-thirds of students who earn four-year bachelor’s degrees are graduating with an average student loan debt of more than $25,000, and 1 in 10 borrowers now graduate owing more than $54,000 in loans. African American and Latino students are especially saddled with student debt, with 81 percent of African American students and 67 percent of Latino students who earned bachelor’s degrees leaving school with debt. This compares to 64 percent of white students who graduate with debt. With $864 billion in federal loans and $150 billion in private loans, student debt in America now exceeds $1 trillion…One of the major self-inflicted causes is the consistent decline in state funding for higher education, which had helped colleges keep tuition affordable. The steadily and rapidly increasing cost of college nationwide prompted a dramatic rise in student borrowing—a natural result as families could no longer rely on scholarships, grants, and personal savings, which cannot keep up with the rapidly increasing tuition costs that have far outpaced the rise in other basic costs like those of health care, gas, and food. Beyond the job losses and decreased savings, the recession also had a major impact on state colleges and universities directly. One major effect was a drop in colleges and universities’ endowment values, which meant that they had fewer dollars to distribute in grants and scholarships to the students who rely on them to pay for school. The recession also led to significant cuts in state higher education funding and consequently a further uptick in tuition. Another cause has been the rise of the for-profit college sector. Students at non-four-year, for-profit colleges have seen the largest increase in student loan debt among any group of student borrowers. In 2001, 62 percent of freshmen at these schools took out student loans—and just eight years later, that number jumped to 86 percent. These trends are a result of a lack of oversight of private lenders and the marketing practices of these loans by for-profit schools in particular.”
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