Student Loan Hits Record $904 Billion With No Relief In Sight
(MintPress)—Student loan debt in the U.S. has hit an all time high, with students facing a collective $904 billion in education-related debt in the first quarter, according to the New York Federal Reserve — a figure that’s only increasing with tuition hikes and an ever growing demand for college degrees in the workforce.
The New York Federal Reserve released its quarterly earnings report, indicating the stark increase in student debt, which has increased by $241 billion in 10 years, continues to grow during a time when Americans are cutting back on mortgage and credit card debt.
Senior New York Fed Economist Donghoon Lee said in a press release that student loan is the only form of debt that has steadily increased since the market collapse of 2008, which spurred the country into a downward recession.
“Student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances,” Lee said. “It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.”
For many coming out of high school, college is the option of choice — one grad sees it as the only viable method to obtain a high paying job. Rising tuition hasn’t kept students away, with colleges more full than ever. Enrollment rates in four-year colleges jumped, with the number of full-time students nationwide rising by 45 percent between 1999 and 2009, according to the National Center for Education Statistics (NCES).
The NCES also indicates a stark increase in tuition from the 1980s to 2010. In 1981, the average four-year student was paying $6,320 for tuition — a number that jumped to $14,870 in 2010.
Now, graduates are dealing with the mounting student debt, and not all are able to pay it back. Delinquency rates for student loans are now up to around 8.7 percent. That’s up from 6.13 percent during the same time in 2003. According to the Fed, that rate is much higher than delinquency rates of mortgages and auto loans.
The squeeze among college graduates and the concern that the student loan debt will only continue to rise has politicians looking for answers. In 2011, President Barack Obama signed an executive order, capping the amount of student loan repayment to 10 percent of a graduate’s income, down from the previous 15 percent.
But that was one year ago, and debt continues to climb. After touting the “Stop the Student Loan Interest Rate Hike Act of 2012” on the campaign trail, Obama failed to convince Republicans in the Senate to pass the measure, which would have delayed an interest rate hike on student loans from 3.4 to 6.8 percent, expected in July. The Act failed in the Senate by a vote of 52-45, with Republicans claiming they didn’t agree with the way in which the measure would be paid for, claiming it could raise taxes on large businesses in order to make up for the difference.
There’s also been another movement to abolish student loan debt all together, with the argument that bailing out graduates would do more than any stimulus package has ever done to reinvigorate the economy, with graduates pouring money into the market. Organizers of the student loan bailout movement paint the picture of such forgiveness as similar to a tax cut — one that would do much more for average Americans than the payroll tax cut.
“The Republican/conservative theories on taxation suggest that if you cut tax rates, the aggregate amount of revenue collected by the government would actually go up, due to economic growth,” the Forgive Student Loan Debt website says. “Here, instead of cutting taxes in the form of a $44 per month reduction in one’s payroll taxes, the millions of middle class Americans saddled with student loan debt would suddenly have hundreds and, in some cases, thousands of dollars extra every month.”
So far the movement has gained attention by Occupy Wall Street protesters, but hasn’t gained much footing within either of the major political parties.
The average amount of debt a student now graduates with is around $25,000, but depending on the school and type of degree, millions of Americans carry student loan debt much greater than the average, with some carrying the burden through retirement. According to a Federal Reserve report issued in April, $60 million of the student loan debt belongs to Americans age 60 and over.
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