While other types of debt have fallen since the recession, student loan debt has increased, and consumers are struggling to meet those obligations, according to a report published in June by the Urban Institute.
The report found that while 20% of adults over age 20 have student loan debt, over half are worried about their ability to pay it. Furthermore, debt isn’t limited to those with college educations; 9% of respondents with student loan debt have just a high school degree and 25% have some college education but no degree. Urban Institute suggested some of those people may have accrued debt for a non-degree certificate or may still be in school, while others may have used the funds for a child or simply didn’t finish school.
People across all income levels had at least some student loan debt, the survey found. Twenty percent of people in households with less than $25,000 in income had student debt compared with 18% of people in households with at least $100,000. Concern about their ability to pay varied widely, though. More than a third of people with at least $100,000 in household income said they were concerned about being able to pay back student debt, compared with 72% of those with less than $25,000 in income. “Concern about repayment among people in high-income households could be linked to higher levels of debt for this group (possibly debt taken on from graduate school), although this link cannot be examined directly with NFCS data,” according to the report.
According to Equifax, the average size of a student loan was $6,242 in March 2013, up 11% over the prior year. Between May 2012 and May 2013, the number of student loans increased by almost 10% to 126 million.
Urban Institute found a wide variance in debt among different races. Over a third of black students and 28% of Hispanic students incurred loan debt, compared with 16% of white students. An April report by Urban Institute found white families have six times the wealth of black and Hispanic families.
The survey found no difference between men and women in the likelihood of having debt, but women were more likely to worry about being able to pay it off. Urban Institute suggested that because many women manage the day-to-day expenses in their households, they “may be more aware of the monthly student loan payments and impact on family finances.”
The paper noted that better information from schools about public and private loans and how they are different is one way to help students make appropriate decisions. Students should also consider factors like their likelihood of finishing their degree and how much they’ll earn when they get a job in their field when they’re choosing their school and how they will pay for it. The paper also suggested expanding the Pell grant program, which provides need-based grants to low-income students. However, the maximum grant for the 2011-2012 award year is $5,550. “Further increasing the maximum Pell grant and expanding refundable tax credits aimed at low- to moderate-income or -wealth families can make college more affordable,” according to the paper.
Sen. Harry Reid, D-Nev., addressed the burden of student debt in comments on the Senate floor on Tuesday.
“The rising price of college means too many young people are deferring higher education. And it has saddled many who do get a degree with unsustainable debt – debt that causes them to delay buying their first home, put off having children or give up on starting a business,” he said.
When Congress failed to approve any of the student debt proposals last month, interest rates on student loans doubled on July 1. Reid said on Tuesday that Democrats have amended their original proposal to freeze rates for two years by shortening the extension to one year and closing a tax loophole that benefits people who inherit retirement accounts.