Why has student debt grown so much in the last few decades? There are more students going to colleges and there is little incentive to contain costs.
"There's a lack of incentive in higher education to be cost-efficient," says Richer Vedder, director of the Center for College Affordability and Productivity, a think tank on higher education finance.
Alumni want new stadiums, good football teams and pretty campuses. Faculty want good salaries and a low teaching load. The administration wants whole lot of administration support. Students want nice dorms and facilities. All of these things cost money.
Even the college rankings in U.S. News & World Report can help drive up costs. Colleges can move up in the rankings by paying professors more, having more alumni who contribute to the school, and attracting better students.
"How do you get good students?" asks Mr. Vedder. "You bribe them [with things like merit scholarships and fancy facilities]. There is a sort of academic arms race. To get to the top, you have to spend. You're not only raising money to keep people happy on campus, but also to improve reputation."
The student loan totals the Class of 2017 are still being tallied, but college and scholarship site Cappex put the Class of 2016's student loan debt at an average of $37,172 per student. That's up 6% from 2015, with debt carried by 70.1% of all graduates. That's also up from $12,759 two decades ago, when just 54% of all students graduated with debt.
Meanwhile, the Federal Reserve Bank of New York notes that total student loan debt reached $1.21 trillion by the end of 2016. That's up $78 billion from a year earlier and is the second largest pile of U.S. consumer debt behind mortgage debt (at $8.48 trillion, up $231 billion from a year ago).
More than one in ten student loans are past due. That's a worse delinquency rate than for credit card bills, of which 7% are past due.
In March, credit bureau Equifax put outstanding student loan balances at $1.334 trillion, up 8.8% from a year ago. More than 1.2 million student loans were taken out in the first three months of the year, accounting for $10.17 billion -- a 22% increase over the value of those loans at the same time last year.
How do you deal with your student debt? Do you have put your life on hold to pay it down, or go delinquent and screw up your credit scores?
Take out Less
Older Millennials (27- to 36-year-olds) told Bankrate that they regret taking on so much student loan debt. According to Equifax, deferred student loans represent 33.6% of total outstanding balances. Outstanding student loan accounts were at 157.1 million at the end of March, 2017.
Why take so much in loans when you can get scholarships and aid from colleges. For example, at Harvard:
Check out Hillview Prep's scholarship page for a list of great scholarships. And do let us know if you know of a scholarship that is not listed on the page.
No Job? You Pay Zero
Federal student loans, unlike other forms of consumer debt (mortgages, car loans, and credit cards), allow debtors to make payments based on their income, rather than the amount they borrowed. After 20 or 25 years of steady payment whatever remains is forgiven.
Income-driven repayment (IDR) plans are designed to make your student loan debt more manageable by reducing your monthly payment amount. If you need to make lower monthly payments or if your outstanding federal student loan debt represents a significant portion of your annual income, one of the following income-driven plans may be right for you:
There is not reason to default on your student loan. First, take out less money. Try to get scholarships and merit-based aid. And for your debt, use the income-driven repayment plans. You don't have to put your life on hold for paying down your student loans.