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Two-Thirds of College Students Take On Debt, but Amount Is Rising More Slowly

September 27, 2019
By Ann Carns

Two-Thirds of College Students Take On Debt, but Amount Is Rising More Slowly

America’s student debt is growing more slowly, but borrowing remains a fact of life for most students. The average burden for indebted college graduates is now nearly $30,000, a new analysis found.

Two in three students who earned bachelor’s degrees from private nonprofit or public colleges in 2018 had student loans — roughly the same as the year before, according to an annual report from the nonprofit group the Institute for College Access & Success.

Borrowers owed $29,200 on average, an increase of 2 percent over the previous year’s graduating class. Student debt grew by an average of 4 percent a year between 1996 and 2012, the report noted.

Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said the current level of student debt was too high, even with the slowed growth. “The numbers are still going up, and that’s concerning,” she said. “$30,000 is not sustainable.”

Average student debt was generally higher in the Northeast and lower in the West, ranging from $19,728 in Utah to $38,669 in Connecticut.

The institute’s estimates are based on information about federal and private student loans reported voluntarily by colleges, and exclude loans at for-profit colleges because so few report what their graduates owe. (The federal government reports more comprehensively on student debt levels every four years and includes for-profit schools, so the institute’s estimates may differ.)

An important factor behind the slower debt growth, the new report said, appears to be increased state and local funding for public colleges, which enroll more than three-quarters of undergraduates.

When tax revenue dropped during the Great Recession, state and local funding fell by $2,000 per student, while borrowing rose by almost $1,100 per student, the report said. As state spending has begun to recover, the student debt picture has brightened.

Still, state funding for colleges has only halfway recovered since the recession, and reliance on student tuition as a revenue source “remains at a near high,” according to the State Higher Education Executive Officers Association.

Modest increases in federal need-based Pell grants also helped. But even so, the maximum grant covered less than a third of college costs in 2018, the institute’s report noted.

Debbie Cochrane, executive vice president of the institute, said that while the slower growth in student debt was encouraging, millions of borrowers continued to struggle to pay their student loans.

A quarter of federal direct loan borrowers were either delinquent or in default at the end of 2018, the report said. (Borrowers are considered in default after missing nine months of payments.)

The share of recent borrowers in default, however, continues to decline, the Education Department reported this week. About 10 percent of borrowers who began repaying their loans in 2016 had defaulted by 2018, down from nearly 11 percent the previous year.

For students from lower-income families, some college debt is often a reality, said Laura Keane, chief policy officer of the nonprofit uAspire, which works with students and high school advisers to help students make affordable choices about where to attend.

UAspire advises all students to complete the form known as the FAFSA, or Free Application for Federal Student Aid, which is required for federal grants and loans, and for scholarships from many states and colleges. The new form for the 2020-21 academic year becomes available on Tuesday.

It’s also important for students to get help with analyzing the financial aid “award” letters they receive from colleges where they are accepted, Ms. Keane said. There’s no standard format for the letters, and some colleges make it difficult to distinguish between grants, which don’t need to be repaid, and loans, which do.

Here are some questions and answers about borrowing for college.

How much money may I borrow for college?

The amount of federal loans that dependent undergraduate students — meaning they rely on their parents for financial support — may borrow each year is limited to $5,500 for freshmen, $6,500 for sophomores, and $7,500 for juniors and seniors, or a total of $27,000 over four years. (The cumulative limit, in case a student takes longer than four years to earn the degree, is $31,000.)

But many families borrow more than that, by taking out federal PLUS loans, available to parents of undergraduates. PLUS loans, which carry higher interest rates, are available up to the total cost of attendance.

Families can also take out private loans from banks and other government lenders. Such loans typically carry fewer borrower protections, and should generally be considered a last resort, Ms. Cochrane said.

How much money should I borrow for a four-year degree?

Students should consider their future earning potential when deciding how much to borrow, said Mark Kantrowitz, publisher and director of research at

“My rule of thumb is that your total student loan debt at graduation should be less than your annual starting salary,” Mr. Kantrowitz said. “Ideally, a lot less.”

The Federal Reserve Bank of New York recently published estimates of typical early-career annual earnings, based on college major. The median was $44,000, but was considerably higher for those with computer engineering degrees ($65,000) and lower for those majoring in elementary education ($35,000).

Where can I see the typical debt held by graduates of a particular college?

Students can check online tools like the College Scorecard, offered by the Education Department, to get that information, Ms. Cochrane said. The scorecard includes only federal loans, not any private loans that students may also have.

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