As graduation season approaches, there is one looming aspect of leaving school that most college students have in common: student loan payments. Out of close to four million graduates, a good 70% of them have relied on financial aid throughout school. The only difference between this year’s graduates and the last year’s batch of new adults is the average amount of debt owed.
A recent study showed that the class of 2016 is going to owe the most in student loans per person ever; in fact, it breaks the record that was set just the previous year (according to Mark Kantrowitz, an education expert). On average, about $37,000 is owed per graduate of this year’s class. This is up from $35,000 from the class of 2015. The rise in overall reliance in student loans is no surprise, yet it is still an alarming trend.
As previously mentioned, about 70% of students rely on education loans which is almost doubled over the past 20 years. On top of this, the mean student loan balance is up 80% over the past decade. These numbers attest to the staggering $1.23 trillion in student loan debt nationwide.
So why are these numbers rising? There has been an enormous push for higher education which coincides directly with the perceived importance of a degree. Along with the rising trend to go to college, university tuition rises steadily which fuels the necessity for financial assistance. Tuition is not the only issue.
There are multiple additional college expenses that are not covered by government funding or private loans: text books, transportation, housing, food, and more. While loans may cover tuition costs, they virtually ignore these expenses. These additional costs have an important impact on the college population, namely lower income students.
Unable to bear financial burdens even with student loans covering tuition, lower income students are much more likely to drop out of college. These borrowers find themselves degree-less and owing loan payments which is a bad combination. In fact, these dropouts account for a significant portion of defaulting payments.
This scenario forces these students to make a tough decision. Drop out of school and face less debt with no degree, or finish school and face more debt with a degree. Both are tough paths to take, but one of them leaves a student with a considerably better chance of landing a high salary job. If any student loan is to be taken, it is very important to finish school.
Despite the rising cost, obtaining a degree is still considered a positive move overall. The degree is the main incentive for attending college, and a degree is the best tool for paying off those loans. While loans are considered an issue, another important issue is the graduation rate. It may be hard to bear the burden of compounding interest, but the repercussions of tackling this debt degree-less may outweigh this tough burden.