Students are burdened with college loan debts because scholarships and grants do not cover every cost associated with attending college or university, and most students will get no free money. Student loans have become to college students what mortgages were to many people during the housing crisis, says Michelle Singletary writing for The Washington Post. The loans are too large and are a terrific burden.
Student loans accounted for 36.8% of the total debt for consumers 20 to 29 in 2014, says a TransUnion report. The number of young people buying homes declined causing debt from mortgages to shrink to 42.9% in 2014 from 63.2% in 2005. Research from the Pew Research Center shows that the largest increase in student loan borrowing over the past 20 years is among affluent families. Middle- to high-income families experienced the largest jump in college graduates who borrowed to pay for school. Why are higher-income families borrowing money for their children’s college education?
One answer to that question, according to the Pew report is:
“Before the 1990s, federal Stafford loans were offered only to undergraduate students who needed financial help. But once unsubsidized Stafford loans were introduced, federal loans became available to all undergraduate students regardless of their financial need.”
Even Boomers are acquiring student loan debt. The reason is probably because they are borrowing on behalf of younger members of the family member who does not qualify for a loan or for a member of the family who is in difficult circumstances. Average student loan debt for borrowers 60 -years-old and older has risen from $14,696 in 2005 to $27,168 in 2014, says 247 Wall St.‘s Paul Ausick.
According to Quentin Fottrell of MarketWatch, US students are borrowing twice as much as they did two decades ago and the total amount of student debt has increased fourfold over that same period of time. Richard Fry, senior economist at Pew Research Center, says:
“Many state legislatures have curtailed the aid they’ve given to higher education,” he says. “If you can’t get it from the taxpayers, you have to get it from the students.”
Male graduates are less likely than female graduates to have borrowed money for their college education. Also in 2012, women were more likely to borrow than male graduates. Some studies say this is because more women than men from low-income backgrounds are completing college.
A big downside to having college loan debt is that it overpowers the borrower’s ability to access credit for other purposes, reports Matthew Patrick of US Finance Post.
Charlie Wise, who is the vice president of TransUnion Innovative Solutions Group, said in a news release on the study findings, “Our study clearly shows that the rapid rise in student loan debt for younger consumers has occurred while the shares of all other loan types except auto dropped, indicating that student loans may be crowding out most other loan types.” He continued and said, “Additionally, younger consumers have found during and soon after the recession that it is more difficult to gain access to credit cards and mortgages, further pushing the decline in those balances.”