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Sunday, August 1, 2021

New York Federal Reserve reports student debt tripled

On Feb. 28, the New York Federal Reserve released a report stating that student debt has tripled in the past eight years.

The federal report indicated that the increase in student debt is a result of more people attending college and graduate school, as well as staying longer in college. Additionally, discarding student debt is difficult and the balance stays with the borrower.

“Due to increasing enrollment and rising cost of higher education, student loans play an increasingly important role in financing higher education. Student debt almost tripled between 2004 and 2012, and stands at $966 billion as of 2012,” said author Donghoon Lee in the Federal Reserve’s Household Debt and Credit: Student Debt report.

Joyce Cleaver, data analyst for the UC Davis Financial Aid Office, responded with a different take in regard to debt at UC Davis.

“This [student debt tripling] has certainly not been the case at UC Davis. We feel very good about the fact that our students are graduating with far less debt than the national average, and roughly 44 percent of the undergraduates who graduated in 2011-12 did so without taking out any loans while on our campus,” Cleaver said in an email. “Each year, our campus has seen an increase in the amount of financial aid that we provide to our students.”

Ann Stevens, chair of the UC Davis Department of Economics, participated in a study group on access and affordability, again stating that UC Davis is less affected by debt than other universities.

“Students who usually get in trouble with loans are those who attend expensive private universities or for-profit schools — such as art institutes and culinary academies — where they must borrow more money. Some even borrow their full tuition amount,” Stevens said.

Steven’s study group also researched the manageability of debt among graduate students at UC Davis.

“The bottom line is that students at UC Davis, or [the] vast majority, have manageable loan amounts. The average loan debt is around $17,000, which is a repayment of $200 a month,” Stevens said. “There’s a lot of hype and scare around paying off student loans. It is easy to go to the web and calculate how much you will have to pay back. Students should not be afraid, but informed about loans.”

In Stevens’ study, it was reported that in 2009 the average California graduate student between the ages of 25 and 28 earned $45,000, which compensates for the average $17,000 loan debt. Between 2010 and 2011, 54 percent of UC Davis graduates had loan debt. Eighteen percent of those had greater than $25,000 in debt and 1.8 percent had over $50,000 in debt.

Jennifer McSpadden, a fifth-year graduate student in French literature at UC Davis, has taken out two different loans — a federal and a private loan — over her 10 years of schooling both at Texas Technological University for undergraduate studies and UC Davis for graduate school.

“The federal loans I receive here at Davis are manageable and as long as I’m in school there is no repayment. However, when I started college at Texas Tech, I was 16 and they advised me to take out a private loan from Wells Fargo, their corporate partner. This private loan has a higher interest rate and starts accruing interest before I even graduated. It runs very much like a business,” McSpadden said. “I was young and completely unaware of the consequences of this loan. When I found out all the information, I was shocked and I did a lot of grieving, but now it is just a part of my reality.”

McSpadden advised fellow students to be wary when taking out student loans.

“I have a lot of debt, which will probably take me four years to pay back. I wish I could have avoided loans altogether, especially private loans,” McSpadden said. “The ability to pay back loans is entirely dependent on whether you get a job or not after college, which does not happen easily.”

Miriam Wyatt, a first-year international agricultural development major, takes out two federal student loans — the Federal Perkins Loan and the Federal Direct Stafford Subsidized Loan. Both are need-based and subsidized, meaning that they do not accrue interest until after the student graduates. Unsubsidized loans are not need-based and begin accruing interest once the loan is taken out.

“Students are afraid to take out loans because they don’t know anything about loans,” Wyatt said. “Many assume there [are] only unsubsidized loans and that there is debt always accruing at high interest rates.”

Wyatt isn’t worried about the debt she’ll have after college, saying it’s manageable.

“I’m in a successful environment here and have more opportunities than anywhere else,” Wyatt said.

Steve Turkowski, a second-year electrical engineering major, said he has no experience taking out loans and has a more cautious outlook on doing so.

“I will probably have to take out loans eventually, but my grandma said I should never take out student loans because they are a rip-off. I [would] end up borrowing loans from my grandma since she would give me zero interest rates,” Turkowski said. “People are afraid to take out loans because it is possible that we will graduate and not get a job, and be left with only debt.”

MELISSA GAHERTY can be reached at city@theaggie.org.

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