Many Graduates Face Unmanageable Debt, Study Says
An estimated 39 percent of student borrowers are graduating with unmanageable levels of student loan debt, according to “The Burden of Borrowing,” a new report by the State PIRG’s Higher Education Project. The analysis, based on data from the Department of Education’s National Postsecondary Student Aid Study, also shows that the average debt among student borrowers has nearly doubled in the past decade to $16,928.
State PIRGs are nonprofit, nonpartisan public interest advocacy groups. The complete report can be found at <www.pirg.org/highered/burdenofborrowing.html>.
Unmanageable debt is defined by a loan industry recommendation that monthly student loan payments not exceed 8 percent of a borrower’s monthly income. The analysis was based on data from the 2001 U.S. Census, which listed the average income of 18 to 24-year-olds with bachelor’s degrees working full-time and year-round in 2000 at $32,101.
“Too often debt burden becomes a ball and chain for student borrowers after graduation. Many student borrowers are taking on unmanageable levels of debt to finance a higher education,” says Tracey King, the State PIRGs’ higher education associate.
The report also found that some groups of students are disproportionately likely to face debt burden. For example, 71 percent of students from families with incomes less than $20,000 graduated with debt, compared to 44 percent of students from families with incomes more than $100,000. In all likelihood, low-income students also experience financial hardship after graduation more often, because they have less financial support from and more financial obligations to their families after graduation.
“Debt levels are skyrocketing, and as a result, many students are graduating with unmanageable debt burden. The situation is even worse for certain groups of students, who are likely to experience even more difficulty repaying their loans,” says King. “Congress should take immediate action to protect these students from dangerous debt burden by increasing grant aid funding and making student loans more affordable.”
King also noted that the figure for students who graduate with unmanageable debt burden is a conservative estimate because it does not factor in other types of debt, such as private loans and credit card debt. In addition, monthly payments for half of all student borrowers are even higher because of interest capitalization on unsubsidized loans.
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