College Debt Crunch: The Biggest Threat to Young Americans’ Financial Well-Being?
Student Debt: The Rising Tide
Students are relying on college loans now more than ever before. In 2004, nearly two-thirds of graduates at public and private four-year colleges had student loans, up from less than half of graduates in 1993.
Despite many parents’ best efforts, college students are taking on education-related debt at alarming rates. In 2004, one-fourth of graduates with college debt carried more than $25,000 in student loans, not including parent borrowing.
Trends show that many students are paying more to borrow for college. A growing number of students are taking out private loans, which typically have higher interest rates than federally subsidized student loans. From just 2004–2005, the number of undergraduate and graduate students who took out private student loans grew by approximately 30%.
Another trend is that college graduates with student loans are taking on higher levels of debt in general. From 1993 to 2004, debt levels for graduating seniors with student loans more than doubled, from $9,250 to $19,200—an average annual increase of 10.8%. If this trend continues at 5%, the average debt level for college graduates in 2004 with student loans will be over $50,000.*
The chart below illustrates hypothetical debt levels for graduating seniors if they continue to increase their reliance on student loans over the next 20 years at 5%, 7% and 9%.
Debt levels trending upward
