Student Loan Debt May Top $1 Trillion This Year

Student loan debt will probably exceed $1 trillion this year as Congress threatens to slash federal aid, the New York Times reports.

Earlier this year, the House proposed numerous cuts to the Pell Grant Program, which has not been able to keep up with the staggering number of students who qualify for federal aid.

Financial aid expert Mark Kantrowitz wrote about the potential cuts for the Huffington Post:

...The proposed cut in the maximum Pell Grant will be the largest cut in student aid funding in the history of the Pell Grant program.

This proposal will cause more than a million students to lose eligibility for the Pell Grant. Every $100 change in the maximum Pell Grant currently corresponds to about 200,000 recipients. The proposed cut in the maximum Pell Grant would mean that 1.7 million low-income students would no longer qualify for the Pell Grant, almost a fifth of current recipients. The remaining recipients would have their Pell Grants cut severely.

President Obama has proposed cutting other financial aid programs to keep the maximum Pell Grant award -- $5,500 -- intact.

Last year, the Project on Student Debt reported that the average student debt was $24,000, the highest figure ever recorded and a 6 percent increase from 2009.

Student loan debt also exceeded credit card debt last year as the largest source of debt for Americans.

As the Times reports, there is some ongoing disagreement over whether student loan debt is "bad" or "good" debt:

In some circles, student debt is known as the anti-dowry. As the transition from adolescence to adulthood is being delayed, with young people taking longer to marry, buy a home and have children, large student loans can slow the process further.

[...]

Susan Dynarski, a professor of education and public policy at the University of Michigan, said student debt could generally be seen as a sensible investment in a lifetime of higher earnings. "When you think about what's good debt and what's bad debt, student loans fall into the realm of good debt, like mortgages," Professor Dynarski said. "It's an investment that pays off over the whole life cycle."

Are you in debt? Do you think student loan debt is "bad" or "good" debt? Share your story below.

Comments

[ponziu]

05:24 PM on 04/13/2011

welcome to the world of debt slavery.... http://ponziu.blogspot.com

[ValeryD22]

04:45 AM on 05/17/2011

Curious just how fast student loan debt is added? FinAid crazy out student loan debt clock see below. He his a site that is declared "This student loan debt clock is intended for recreational purposes," But the way I do not think that increases the total amount that U.S. students are happy . As for the federal funding, there is a new rule that was proposed in order to refuse any federal cash advance to any educational institution with the rate of loan default is higher than 30%. Actually, a number of private universities have already reached this level.
http://ameriloansearch.com/news/default-rate-on-student-loans.html

[LUCKY7]

10:37 AM on 04/13/2011

Higher Education is the United States has become a joke. I worked in admissions at a prestigious law school and now work at a "respected" university in Washington, DC. When going through the recent graduate school applications along with the temporary workers, who were hired to open the envelopes, you quickly discover that it is all about the money. In fact, the higher-ups at this university are ACTIVELY RECRUITING students from overseas (CHINA), whose families can make substantial donations to the university because there is the unspoken understanding that American college students with potential debt burdens won't make the best donors. Those applications are placed in a special pile. Whether anyone chooses to face it or not, it has been and always shall be about the money until someone pulls away the curtain. I can't tell you how many applications came in where the PARENTS wrote a letter along along with the student's applications... with the stipulation that a large donation (with actual figures) will be made following acceptance. I along with one other co-worker are shredding these letters and the applications to destroy this disease at the onset. Is it unethical? Probably. But one has to dismantle this flawed system somehow.

[Feudi Pandola]

08:29 AM on 04/13/2011

Student loans will be the next class of toxic assets. Book it.

[zSpin2001]

11:21 AM on 04/13/2011

This happens to be a misunderstanding, because congress changed the law so that if you claim bankruptcy your students loans are not forgiven. Instead of toxic debt, large student loans have turned into a walking debtors prison. Please see section 523 of the Bankruptcy Code for an explaination on a bankruptcy discharge.
http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/DischargeInBankruptcy.aspx

[Feudi Pandola]

12:25 PM on 04/13/2011

Zspin2001: I am aware that these loans are not subject to bankruptcy law. That's what makes them even more toxic than mortgages. This means the public has no chance whatsoever of recovering on defaulted loans. When we see the true scope of these losses, the sky will fall for higher education.

[Picachu]

06:59 PM on 04/12/2011

Like everything else in this country they have managed to turn education into a for-profit enterprise. So let's make the cost of education so dear that fewer and fewer of our young people take that route. That way we can fall further and further behind the rest of the world. But hey, that will produce more stupid people, and that will work our well for the right wingers. Unbridled capitalism has just really advanced the well being of our nation over the last 30 years - at least for 2% of the people anyway. Soon there will be little difference between the US and Mexico where a few wealthy people have everything, and everybody else is left to fight over the scraps.

[Genders]

06:12 PM on 04/12/2011

Free public education for all who need it, is the cornerstone of democracy.

[AZ Stang]

06:02 PM on 05/01/2011

We already have that, but it's not free. Our taxes pay for it.

[Daniel Spears]

05:57 PM on 04/12/2011

I would say Student Loan debt is a bad thing. I am currently in student loan debt with no hopes to pay it off and live a quality life. I had to make a decision - do what I wanted as a career or pay my loans. I teach English (in Spain). I made a choice - work at a desk, as a temp, in an office, living at home with my mom and not be able to pay my loans OR live in a foreign country, learning a language, teaching a language, and immersing myself in an interesting culture and not pay my loans. I chose the latter. I may not be able to buy a house, but, I'm fine with that. I don't think it's fair that I had to make that choice and have the fear of debt reprisal. I do think University should be free or affordable to all for the first 5 years of undergraduate. After that, a person should have to worry about tuition. I also believe that standards for acceptance into a University should be harder as well as the ability to remain in the University as well. However, alternative quality routes for a university education should be available as well. But, I'm a dreamer, lord knows it's more important to give billionaires tax breaks than fund a free quality higher education.

[FordUSA]

06:14 PM on 04/12/2011

Exactly, and dont worry if they ever garnish your wages and move on to another job. Good luck with them finding you again.

[Daniel Spears]

06:35 PM on 04/12/2011

Thanks! I have to say, I nearly laughed at the woman on the phone when she told me they would garnish my wages over the summer. I didn't have summer work at the time and all I could think of was 'good luck'! Oh well.

[cigi]

10:26 PM on 04/12/2011

Daniel, I am glad you have a way to live at least. So many in college today will be in your position in the future unfortunately. My husband and I both earned Bachelor's, Masters/MBAs, Certified in our particular fields and never had student debt. We paid as we went or did it on the Corporation that we worked for education benefit. Since the the late 80s, those benefits have been dropping, as Corporate AMerica sees no reason to train it's workers or invest in them. We put two children through small State Universities and paid as we went. There is no good reason that anyone should have to go through financial hell to get an education. I have a niece who is in her Surgery Residency...she will owe about $200K when she becomes a full-fledged surgeon. We are pricing the idea of education out of sight and expecting graduates to work for peanuts with no benefits or upward mobility. I hope this is as far as this crazy right-wing pendulum swings, but I am not sure that I will see it turn around in my lifetime. Good luck in your endeavors and thanks for sharing.

[bllnsinchnge]

05:57 PM on 04/12/2011

Cheap Fed backed, easy access credit. Does that ring a bell?
Government guarantees have been driving up prices for decades in education via grants and student loans. When you offer up that much easy access to credit, the market raises prices so demand can equal supply.

The price of education should be falling due to telecommunications and information sharing technology.

[cigi]

10:31 PM on 04/12/2011

That is true, because the Banksters of America just had to get a piece of the deal. I never had to borrow from a bank to go to the university I graduated from and my education is a mix of public and private educational institutions. I actually could afford to pay my way and feel very lucky that I was going to school when I did. People started doing crazy things in the 1980s at colleges...naming stadiums for companies used to make me crazy! Banksters came on campus to sign up "children" of 18 for Credit Cards...what a racket! I blame the greedy administrations and the Banks who got their fair share of money for doing this. They hobbled so many young people with enormous debt before they ever got the sheep skin! Was it legal, absolutely...was it ethical, NO!

[Samcat604]

05:40 PM on 04/12/2011

Cheap credit.

Whether it be in the housing market or student aid, it will result in people taking more credit than they willing to pay back.

This is the next bubble to burst.

[janiepants]

05:30 PM on 04/12/2011

These loans are going to do the same as the mortgage loans, really soon. They are handing out student loans like candy and there isn't a strong enough job market for these people to be able to pay back. Are you breathing? Then you too can get outrageous amount of money in student loans.

[myth buster]

06:13 PM on 04/12/2011

The difference is that there's no tangible asset securing student loans. Instead, student loans are backed by the student's future labor and social security benefits (not kidding- they will garnish your social security benefits if you retire or become disabled with outstanding student loans).

[FordUSA]

06:31 PM on 04/12/2011

yeah 15% so what?

[FordUSA]

05:29 PM on 04/12/2011

Here is a SECRET KIDS companies don't care about Degree's or Education. I was brainwashed by my High School Teachers that I needed to go to college to get a good job.

I have worked for the best corporations and they never gave a dump about my degree.

Microsoft, Intel, Verizon

Go to a trade school, or volunteer and learn from someone in the trade but stop giving your life to the maf1a we call student loans..

[Samcat604]

05:42 PM on 04/12/2011

Yeah, but your ceiling of where you can go is much better with a degree.

Or join a union, and make more than professionals for tightening a bolt for 8 hours a day.

[myth buster]

06:14 PM on 04/12/2011

Only works as long as the company sticks around. I'd be saving a lot of that wage if I was in that position, because it might not last very long.

[JustinP213]

12:37 PM on 04/13/2011

Exactly. If I were any good at fixing things and didn't have wealthy parents, I would have skipped college and joined a trade union. In NJ, for example. prevailing wages for NJ construction projects are very good. And, people in those jobs just need a GED. I highly recommend that people across this country that aren't good at math or science seriously consider whether college is your best option. Many of you would be better served, at least financially, to pick up a trade and join a union.

[Seven Teenatheart]

11:12 AM on 04/13/2011

That's not true anymore. I remember when it was, I got into technology enough years ago that a few courses were enough, and now I have an impressive enough resume that I don't need to worry about it anymore.

BUT, nowadays I have to have CEO approval to hire anyone with less than a bachelor's degree. I used to be able to hire any kid off the street who could prove that they had the skill set we needed (testing, coding , etc), but those days are over.
The only exception is if they have "equivalent work experience" which can be 6-10 years already working in the industry.
And this is for an entry level software position.

I can say that the school these kids go to doesn't matter to me. I interview based on aptitude and test every applicant.
But they NEED that degree.

[AandPMech]

05:17 PM on 04/12/2011

Just default on student loans..,

I went for 30 years without paying them a dime. then at age 65 they are garnishing my Social Security but can't take more than 15 percent. Thats the law/.

So I am paying off with devalued dollars and I don't care because I have 3 other pensions. I will never pay off the student loan in my lifetime. Like I really give a flyingphock.

[FordUSA]

05:19 PM on 04/12/2011

I agree that is my intention as well. I got suckered by the school to fund a worthless education. The job I have now is not because of a degree not because of what I learned in school but because of what I learn on my own. They can their worthless degree back I will never pay them a dime.

[AandPMech]

05:37 PM on 04/12/2011

Good move and don't let anyone put you on a guilt trip. Its business. just like the banksters do.

[ehc27]

05:40 PM on 04/12/2011

You're a horrible person.

[AandPMech]

05:42 PM on 04/12/2011

hahah. so???

GFY ...you dolt

[AandPMech]

05:44 PM on 04/12/2011

I may be horrible but I am enjoying my retired life and have no debts. other than the student loan which I am NOW paying off a little at a time for the rest of my life. I don't see it so don't miss it.

[Gaylord P Farqua]

05:08 PM on 04/12/2011

Instead of supporting future leaders in science, math, engineering and, the humanities we would rather cut taxes for the rich (who can afford to send their kids to the most expensive schools) and strip the system of grants to exceptional students. Add to this the nationwide crusade by GOP/Tea Party Governors and legislators to slash education budgets and destroy the public schools and you have the "PLAN" which as implemented will send the dumbing down of America into warp speed and guarantee a cheap labor market for the oligarchs. We are destroying ourselves from within. Every successful nation invests in education and our race towards failure can be traced to what these "crusading expense cutters and deficit fighters" are doing by not looking to the revenue side (Rich people who grossly under pay taxes) and support the nation's youth and everyone's future.

[myth buster]

06:16 PM on 04/12/2011

Financial aid doesn't do much for students, but it does a lot for academia.

[Ed Baker]

05:06 PM on 04/12/2011

This figure is higher than all the credit card debt in the US.

Clearly - the programs have to be re-evaluated.

We hand this money out way too easily. We give student loans and grants to people who were complete failures in high school.

We should qualify students based on academic achievement and need.

Instead we hand it out to anyone and everyone - and then wonder why it never gets paid back.

If you were a horrible student in high school, chances are, you're going to flunk out of college (if you go to a real college.)

We should also do a much better job of qualifying the schools before the student can get the loan. Many of the for profit schools and "college in your PJ's" online schools are a complete fraud. These "schools" are a wash in public money.

[NewYank]

04:34 PM on 04/12/2011

My children are absolutely "thrilled" with their debt load! They are responsibly paying off their debt, which is over 30% of their monthly salaries. They are doing this by working two jobs and hoping they win this weeks MegaMillions jackpot. Does anyone has any lucky numbers they'd like to share...?

[FordUSA]

05:20 PM on 04/12/2011

tell them to default and F the government

[cigi]

10:39 PM on 04/12/2011

God bless your kids and I hope this turns around for them. It is a sad legacy for us all.

[dkrypt]

04:10 PM on 04/12/2011

Student loan burdens reflect high college costs.

High college costs reflect government subsidies and easily available student loans.

Break the cycle.

[cigi]

10:43 PM on 04/12/2011

Government subsidies have been around forever. I graduated with my BA in 1979 and everyone was going to school on the VA(thank you Vietnam War and our Vets deserved all of that help), there were also Pell Grants then, LEAP (Law Enforcement Assistance Program) and at that time I was spending less than $400 a Semester for a full course load at the University of Missouri, Kansas City...guess what student loan burdens were negligible. I could have gone on to law school for $7K a year! When BANKS got in on the action was when COSTS SKY ROCKETED. Public funding was a leading factor for RISING COSTS!