The Continuous Increase in Student Loans

Americans are accumulating more debts for college payments. This is the case despite records showing that in the past three years, they have been cutting on other types of loans such as mortgages, credit cards and vehicle loans. Here is an overview of the current debt scenario nationwide.

For student loans, the total debt was at $550 billion by the end of quarter two of this year. This is an increase of 25% as it was only at $440 billion during the third quarter of 2008, the period when household debt was at its highest. These numbers were provided by New York’s Federal Reserve Bank. On the contrary, the overall household debt has reduced by around 9%. In the past, it was at $12.50 trillion and it is already down to only $11.42 trillion. This decline is partly caused by the tightening of lending standards and banks’ write-offs of delinquent loans. When student loans and household loans are compared, a steady growth is seen in the former than the latter.

The figures above imply that recession is fueling the debt that students make. This may be due to the fact that college enrollment increases whenever jobs are not available. Moreover, the number of needy students is also growing at this time, said Mark Kantrowitz, publisher of Finaid.org, a tracker of industry relating to student loans.

For instance, there are around 9 million students who obtained Pell Grants. These mainly goes to students with lower than $40,000 in household income. This number is a huge increase from the $6 million grants given during the school year of 2008 to 2009.

Kantrowitz said that there is a possibility that the Fed in New York lowered the growth figures of the total student loan debt. He added that the numbers exclude the important interest costs that accumulate while students are still in school.

There is also a growth in the debt per student ratio. In 2009, the average level of debt for each student is around $24,000, reports the Project on Student Debt. At this rate, almost 2/3 of students finish school with loans.

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