Student borrowing is, slowly but surely, on the rise.
While the amount of debt accumulated by graduates of public and private four-year colleges grew relatively slowly, the amount of debt by certain groups in higher education grew rapidly between 2003 and 2008, according to a recent study by the College Board.
A growing minority of students, however, still graduate with excessive debt.
“The analyses in ‘How Much Are College Students Borrowing?’ examine the borrowing decisions students and families are making,” College Board President Gaston Caperton said in the College Board’s press release on the brief.
“We are committed to working with our member colleges and universities and policymakers to create a financial aid system that will help a new generation of students, especially low-and-middle income students, pay for college without unmanageable debt,” he said.
The brief analyzes information in the U.S. Department of Education’s National Postsecondary Student Aid Study, which reveals that among all students who completed a degree – Associate, Bachelor’s or a certificate – in the 2007 to 2008 academic year, 41 percent graduated with no debt.
Among all students, those completing any undergraduate degree with education debt increased from 54 percent in 2003 to 2004 to 59 percent in 2007 to 2008.
Most of the growth in borrowing that occurred between 2007 and 2008 occurred in the for-profit sector, or the private nonfederal loan market, as well as students earning certificates and two-year degrees. Unlike federal loans, private loans do not have limited interest rates or provisions for economic hardship.
“The big increase in borrowing was in the for-profit sector, (which is a relatively small sector as a percentage of all postsecondary students), from 85 percent to 95 percent,” said Patricia Steele, an author of the brief, in an e-mail interview.
Steele advises students to try to borrow from the Stafford loan program and to avoid most private loans. Steele said students should make sure they understand the debt they decide to take on and what the monthly payments will be on each loan they sign.
Forty-seven percent of the 2008 UCD graduating class borrowed money, and the average indebtedness of students was $15,155, said Joyce Cleaver at the UC Davis Financial Aid Office.
Although the College Board brief indicated that student debt is slowly increasing, Steele said that as long as students do not borrow in excess, debt can be manageable.
“Some borrow an extraordinary amount and this is a real concern,” Steele said in an e-mail interview. “Others borrow only a little, but still struggle with repayment because of the debt to income ratio upon graduation (or if they don’t complete a degree).“
Students in financial hardship due to loans are still in the minority, at least in the class of 2008.
In this economic climate, one issue with borrowing is the fact that students can no longer count on getting a job after they graduate.
“Whether or not you can pay back your loans really depends on the kind of job you get,” said Vanessa Guzman, junior at UC Davis. “Some people can quickly pay back their loans if they get a good job.“
Steele said it is best to plan ahead.
“It’s important to consider that your future salary is no longer a guarantee immediately after graduation, so it’s best to think about ways to keep the cost down and borrow the absolute minimum that you have to borrow,” she said.
SARAH HANSEL can be reached at email@example.com.