Wednesday, June 19, 2013
This isn't a surprise to anyone who knows -- or is -- a recent college graduate staggering under the weight of huge student loans.
But others should note that the Federal Reserve Bank of
That runs against a trend in which all other forms of consumer debt have been falling. Thus, the report says, "The unique behavior of student loans -- the only type of household debt to experience steadily increasing balances and delinquency rates since 2008 -- merits special attention. ..."
Just like many mortgages, ever-increasing percentages of student loans are not being repaid -- even though they have been made more difficult to discharge through bankruptcy than other types of debt.
And yet, the N.Y. Fed reports, "Total student debt stands at $966 billion as of the fourth quarter of 2012. ... The number of student loan borrowers and the amount each borrower owes have both risen 70 percent since 2004."
The number of degree-seekers is rising for several reasons. First, more employers use a degree as a minimal "weeding-out" standard for entry-level positions in areas that formerly did not require them.
Second, other employers have boosted their academic qualifications simply because more students have met the minimum requirement, so the larger pool of applicants has enabled employers to be more choosy.
And generations of students have been told a degree beyond high school is a ticket to far better incomes over a working lifetime. The number of students seeking college degrees has risen 12 percent in just the past five years, the College Board reports.
But since relatively few can afford to pay the costs of higher education out-of-pocket, much of the expense is financed by easily acquired loans and federally subsidized grants. So, schools have until very recently not felt any need to restrain spending or hold down tuition fees, which have risen far faster than the rate of inflation.
CNN Money reported last October that tuition at public four-year colleges had risen 104 percent over 10 years, more than triple the inflation rate.
At private nonprofit four-year schools, the rate of increase (from a much higher base) was 60 percent -- still twice the rate of inflation.
So as student numbers and college costs soared, student debt rose, too, especially in professional schools.
And it's getting much harder to repay that debt, because fewer jobs are available in a number of professional specialties, including the law, veterinary medicine and other fields where qualifications require substantial outlays for professional schooling.
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