Life After (Student) Debt

The growing cost of knowledge is a lesson in itself

Undergraduate and grad students are finding out the hard way just how much it costs to get an education. Nellie Mae, the largest nonprofit provider of student loans in the country, reports that the average student can expect to graduate with $18,800 in student loan debt–up nearly 130% from $8,200 in 1991.

According to a study by the USA Group, an Indianapolis-based provider of student loan services, an undergraduate with an average $9,723 in loans will need to make monthly payments of $118 for 10 years let 8% interest). For grad students with $20,457 in debt, it gets worse–they’ll have to pay more than twice that amount, $248.

Educators cite two primary reasons for the increase. After the Federal Unsubsidized Stafford Loan Program was created in 1992, it opened a floodgate of new applicants who were previously ineligible. Borrowing increased 42% between the 1992-93 and 1993-94 academic years. Even more alarming, many students are now taking the credit card route to pay for tuition and fees. About one-quarter of respondents to the Nellie Mae survey used them to finance their education.

“Did You Know…?”

The average student loan debt for blacks and Hispanics is $16,300 (vs. $18,900 for whites).

The average income level of borrowers doesn’t vary much by race ($26,000 for blacks and Hispanics vs. $27,000 for whites), but the pattern of distribution does. About 15% of blacks and Hispanics earn less than $10,000 (vs. 10% of whites), while 28% of blacks and 21% of Hispanics earn over $30,000 (vs. 18% of whites).

About 70% of black, Hispanic and Asian students who drop out blame the burden of student loans (vs. 43% of whites).

Twenty-six percent of black students say they’ve changed their career plans because of debt (vs. 19% of Hispanics and 16% of whites).

Source: Life After Debt Summary Results of the National Student Loan Survey, Nellie Mae, Braintree, Massachusetts, 1997

Income Needed to Repay Average Stafford Loans

Graduate

Students

Undergraduate Students

Community/2/3-Year

College Students

Average debt burden

$20,457

9,723

$4,358

Monthly payment

248

118

53

Minimum annual income needed to meet 8% rule

37,230

17,695

79,31

Source: Reality Bites: How Much Do Students Owe?, USA Group Loan Services/ USA Group, Indianapolis, 1997

B.A. Recipients with Federal Student Loan Debt

Public Four-Year Average Private Four-Year
Family Income

Percent who

had borrowed

Average amount

borrowed

Percent who

had borrowed

Average amount borrowed

Less than $30,000 66% $12,550 70% $15,240
$30,000- $49,999 56 12,370 62 13,790
$50,000- $69,999 40 10,320 42 13,500
$70,000 or more 24 92,90 29 12,360
All income levels 52 11,950 54 14,290
Source: National Postsecondary Student Aid Study: 1995-1996, U.S. Department of Education, National Center of Education Statistics, Washington, D.C., 1997
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