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Federal Student Loan Debt Now Exceeds Credit Card Debt

By Katie Thompson

Students are borrowing double what they did 10 years ago, even after adjusting for inflation, according to the College Board. Total student loan debt now exceeds credit card debt.

With more than half of students at St. Edward’s University covering all or part of their tuition with student loans, accruing debt is a major concern.

About 58 percent of students at St. Edward’s rely on student loans to pay for tuition, according to Doris Constantine, associate vice president of Student Financial Services. Most take advantage of scholarships, grants and assistance from their parents in addition to student loans, she said.

“By the time I graduate from St. Edward’s, I will have accrued about $40,000 of student debt,” sophomore Mari Serna said. “I know that this number isn’t the highest I have seen students carry, but it also isn’t the lowest.”

The average debt burden per student is $24,000, according to the Institute for College Access and Success.

The issue came to national attention when a USA Today article reported on Oct. 18 that student loan debt could reach $1 trillion this year. The projection, made by Mark Kantrowitz, an administrator of FinAid.org, was incorrectly attributed to the Federal Reserve Bank of New York.

Kantrowitz’s projections are too high, but the New York Fed’s numbers are also too low, according to financial journalist Felix Salmon, who pointed out the erroneous citation in his Reuters blog.

The New York Fed “will revise its numbers for Q2 2011 in coming weeks,” Salmon said. “And yes, the new numbers will show that student loan debt exceeds credit card debt. But they won’t show student loan debt at $1 trillion.”

Regardless of the exact figures, student loan debt is a problem for many students in the U.S., including at St. Edward’s.

“Trying to pay for private school tuition on an 18-year-old’s budget equals taking out student loans,” Katie Shagman, a recent graduate, said.

The increase in student loan debt does not necessarily indicate a worsening economy, but it could have negative ramifications for the future economy, associate professor of economics Matthew Clements said.

“A potential long-run problem is that the necessity of borrowing for education could discourage some from obtaining an education,” Clements said. “There would then be less human capital than there would otherwise, and less growth as a result.”

Clements said the trend of increasing student loan debt will likely continue, barring any major changes to the higher education system, such as reduced tuition or expansion of government subsidies.

Should dependence on student loans continue to increase, Constantine said Student Financial Services will be ready. Beginning in January, Student Financial Services will expand its existing counseling resources and launch an online tool to educate students on student loans and finances in general.

Student Financial Services was recently named a charter member of American Student Assistance, a non-profit group dedicated to educating students about finances and debt management.

These resources are valuable, Shagman said.

“My financial aid officer was instrumental in helping me make calculations, plan ahead and map out a pay-back strategy,” Shagman said. “I’ve made payments on my student loans since December 2007. They are annoying, but manageable, and would have been so much worse without a financial aid office support system.”

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This story was first published in the St. Edwards Hilltop Views

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