September 25, 2007

Student-Loan Debt Rises Faster Than New Graduates' Starting Salaries, Report Says

The average student-loan debt facing graduating seniors in 2006 increased more rapidly from the previous year than did the average starting salaries offered to recent college graduates, according to a report being released today by the Project on Student Debt.

In its second annual report, “Student Debt and the Class of 2006,” the public-policy group found that the average loan debt increased by 8 percent from 2005 to 2006, while starting salary offers rose by about 4 percent. Over all, the report estimates, the average student-loan debt for the Class of 2006 was about $21,100.

Students who graduated from institutions in Washington, D.C., faced the highest average debt, $27,757. Graduates of colleges in Hawaii accumulated the lowest average debt, $11,758.

The report makes several recommendations about how to reduce students’ need to borrow and the risks they assume when they do take out loans. It urges the federal government to increase the value of the Pell Grant and to make sure that borrowers have “fair and reasonable” repayment options. The report also says that colleges should do more to counsel students thoroughly about their financing options, and that states and institutions should focus their funds for student aid on helping people with the most financial need.

The project’s Web site includes an interactive map with statewide debt averages and campus-by-campus data. —Sara Hebel

Comments

1. The recommendations are good, but part of the issue is that student loan debt is the first debt of any size a borrower acquires. Educating students effectively on responsiibilities somehow needs to go deeper than has been done in the past.

   — John    Sep 25, 04:53 PM    #

2. Counseling students on appropriate levels of debt is all well and good, but it’s hard to argue that a student has made an irrational decision on whether or not to take out a loan if the annual cost of attendance at their school is $20K and they take out a loan for $20K and wind up with an $80K debt after for years. It seems like political expediency to blame “irresponsible college students” rather than legislatures who have reduced Higher Ed. funding and colleges that have raised costs (as well as those that have raised costs on colleges, like insurance companies).

   — JS    Sep 25, 05:33 PM    #

3. Everything that costs is getting more expensive faster than salaries are rising. That’s the modern economy at work.

   And don’t get the idea that more education in personal responsibility will help. For many, a student loan is the only way to cover educational expenses. The expectation is that the salary at the end will be so much better than the current salary that the loan will take care of itself. Students need to be disabused of that notion. Or they may not even finish school, and then they’re stuck paying for an education on a salary of a non-educated person. THAT is the education they need. Not one of more personal responsibility, which I think most people already “get.”

   — Carlo    Sep 25, 05:35 PM    #

4. Despite the faster growth of college debt to starting salaries, there is still ample economic evidence that investing in a college education provides one of the best returns for your money—and that is simply considering personal pecuniary benefits. Federal loan programs eliminate the liquidity constraints involved with attending college—since when was it the government’s job to finance personal investments? If I want to buy a house (and some houses cost less than a 4-year education at some schools), should I expect to not have to go into debt (i.e. get a mortgage) to buy my house?

   — Matthew    Sep 26, 03:51 PM    #

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