July 17, 2013 —
Utilizing low interest government loans to finance a college education has become a well-established tradition in this country.
In fact, recently-published data says former college students, including those who left school short of a degree, owe a total of $1.1 trillion in outstanding loans.
Student loans have been in the news with this month’s effective date of the doubling of the interest rate from 3.4 percent to 6.8 percent on federal subsidized Stafford loans.
As recently as 2011, the average debt of a student borrower at graduation was $27,547, according to USA Today.
That was up from the national average of $9,350 in 1993. It obviously reflects the higher costs of attending college during that 18-year period.
A major component in rising college costs has been tuition increases at public institutions where state governments have been unable to keep pace with the cost of living because of declining state revenues.
In Kentucky alone, the state budget has gone down by more than $1 billion since 2008 with public higher education taking cuts of more than $100 million.
Kentucky college students owe an average of about $22,000, according to various sources.
It is estimated today that student borrowers owe more for loans than household consumers owe for credit cards.
So what’s the other edge of the sword for college loans?
First and foremost, starting a career with significant personal debt is affecting the decisions that new grads are making about homes, jobs and other long-term commitments like marriage.
A recent national report says student loans were making it more difficult for college graduates to borrow money to buy homes and cars or to start a small business.
Another survey from last year found more than 13 percent of college graduates without jobs and nearly 17 percent of men between 25 and 34 and upwards of 10 percent of women in the same age range living with parents or other family members.
It has been proposed that student loan interest be tied to the5 interest rate that banks pay the Federal Reserve.
We believe that is a better plan than having the student loan interest rate become a political football each time it surfaces in Congress.
We also support putting all student loans on an income-based payback plan instead of the current 10-year schedule.
Unless the rules change, future college students won’t be able to afford pursuing their own American dream.
Surely no one wants to return to the days when only the wealthy went to college.