Nearly two-thirds of four-year college students in the United States borrow thousands of dollars each year to pay for their education. Some carry more than $100,000 in debt. And most are still repaying their loans years after graduation.
Student advocacy groups say debt carried by both public and private university graduates has more than doubled in the past decade -- increasing 58 percent after accounting for inflation, from about $9,000 to nearly $19,000.
High Hopes, Big Debts
Analyst Jacqueline King of the American Council on Education says the numbers vary depending on several factors. "For Bachelors degree recipients, about 60 percent of students graduate with debt and the median amount is about $16,000. For graduate students, it varies tremendously by type of degree. Students with Masters degrees leave with median debt levels of about $25,000," says King.
Many professional graduate students carry even larger loans. The median debt for medical students is about $115,000 and more than one-third of medical students owe between $150,000 and $200,000 by the time they graduate.
Most students who borrow pay back their loans within ten years. By most estimates, only about six percent default on their payments. But Mark Kantrowitz, publisher of FinAid.org, an independent financial aid and college resource Internet site, says growing numbers of low-income students who typically take out large loans are struggling to repay their debts.
"The number of students who borrow more than $40,000 is on the order of about seven percent these days. And that's starting to get into the problematic area. If you borrow more than twice your expected starting salary, then you are definitely going to have financial difficulty,” says Kantrowitz. “Another issue with regard to low-income students is that the requirement that you take out some amount of debt has a chilling effect on their enrollment in higher education. If someone told you that you have to borrow more than your parents earn in a year to pay for your college education, you would think twice about going to college."
Rising College Tuitions
Last year, the federal government gave more than $40 billion in grants and subsidized loans with reduced interest rates to more than ten million students. But many analysts who consider this aid essential for low-income families say the dollar value of federally subsidized loan programs has not kept pace with inflation and rising college tuitions.
According to the U.S. Department of Education's College Board, the average tuition at four-year public universities has increased 51 percent during the past decade, adjusted for inflation. Many financial experts warn that this has driven many students to supplement their subsidized loans with more expensive private loans and to pay many bills with credit cards.
The resulting debt burden, some analysts say, has affected the lifestyles of some low-income graduates, leading them to postpone getting married, buying a home or saving for retirement.
But the American Council on Education's Jacqueline King says there is little evidence to support these claims.
"You see it somewhat for people finishing professional schools. They may choose to go to work for a law firm rather than working in government because they need the higher salary to pay back their student loans. But in terms of Bachelor's degree recipients - - the typical college graduate - - we haven't yet seen a major impact on things like starting a family, buying a home, the other kinds of major financial
commitments,” says King. “We are hearing anecdotes. But so far in the empirical research, we don't see a large-scale impact of borrowing on student behavior in terms of things like forming a family or purchasing a home.”
More Federal Financial Aid?
Some analysts say federal student aid programs often benefit people who are economically well-off and that student loans force college tuitions to rise. That is why the Cato Institute's education policy analyst, Neil McClusky, advocates phasing them out.
"A lot of parents who want their kids to go to school say, 'This is not affordable to me.' So they complain to Washington. So then the politicians in Washington who want votes increase student aid. This increases demand, which, of course, increases prices,” says McClusky. “And colleges look at it and say, 'People can afford to pay more now.' And, of course, the tuition goes up again. Parents talk to the politicians. And it's a vicious cycle where we keep feeding the inflation by trying to help people cope with it now."
Most student advocacy groups reject this assessment, saying more federal aid is needed to bridge the gap in higher education access that runs across ethnic and economic lines.
Economist Sandy Baum of New York's Skidmore College says education should be more affordable and federal student aid should better target low-income families.
"We need to look carefully at the student aid system to make sure that there is adequate funding available for students who really don't have the money to pay to be able to afford to go to college. And that's just critical,” says Baum. “Certainly on college campuses, we need to look at ways to drive down the cost of providing education. Part of this, of course, is the issue of state funding. When states cut back on their funding for public institutions, that causes prices to rise.”
Most financial aid experts view moderate borrowing as a sound investment in a student's future. That is why Congress has adopted several initiatives in recent months to lower interest rates on student loans, increase grant and loan allocations and give low-income students greater access to federal funds.
This story was first broadcast on the English news program, VOA News Now. For other Focus reports click here.