40 years ago, excess student loan debt wasn’t something that most people worried about. Times have certainly changed- today, student loans are among the most significant debt that most families and students must face. And unlike mortgage debt, student loan debt impacts most students before they have a steady job with a reasonable salary, meaning that they are often forced to forego big purchases like a car or a home. As the Christian Science Monitor reports, this problem is getting worse, not better:
With college enrollment growing, student debt has stretched to a record number of U.S. households — nearly 1 in 5 — with the biggest burdens falling on the young and poor.
Analysis by the Pew Research Center found that 22.4 million households, or 19 percent, had college debt in 2010. That is double the share in 1989, and up from 15 percent in 2007, just prior to the recession — representing the biggest three-year increase in student debt in more than two decades.
The increase was driven by higher tuition costs as well as rising college enrollment during the economic downturn. The biggest jumps occurred in households at the two extremes of the income distribution. More well-off families are digging deeper into their pockets to pay for costly private colleges, while lower-income people in search of higher-wage jobs are enrolling in community colleges, public universities and other schools as a way to boost their resumes.
Because of the sluggish economy, fewer college students than before are able to settle into full-time careers immediately upon graduation, contributing to a jump in debt among lower-income households as the young adults take on part-time jobs or attend graduate school, according to Pew.
As a share of household income, the debt burden was the greatest for the poorest 20 percent of households, or those making less than $21,044. In all, 40 percent of U.S. households headed by someone younger than age 35 owed college debt, the highest share of any age group.
The richest households saw significant increases in per-household debt. For those with annual income of $97,586 to $146,791, college debt rose from $25,921 in 2007 to $31,989. For the richest 10 percent, making at least $146,792, college debt increased from $36,033 to $44,810.
Across all households, the average outstanding college debt increased from $23,349 to $26,682. For the poorest 20 percent of households, the average debt rose from $19,018 to $20,640.
Student loan debt is out of control—and most families recognize this. However, many of them don’t feel that they have a choice. After all, college is essential for the success of their children… but it’s expensive, and financial aid only covers so much. What can they do besides borrow money?
Actually, there’s a lot you can do to avoid excess student loan debt. Most families don’t know this, unfortunately, because banks have a vested interest in issuing more loans. At US College Planning, we specialize in helping families avoid debt by increasing scholarships, grants, and need-based financial aid. We help families negotiate more effectively with financial aid officers, we help families to structure their finances in such a way as to (legally!) receive more aid, and much more.
So if you feel like you have no choice but to drown in student loan debt, we’ve got good news. We CAN help you pay less and borrow less for college. Contact us today to learn more!