New study shows that many college students are in debt

    Four out of 10 U.S. college graduates face unmanageable levels of student loan debt, according to a report released by the California Public Interest Research Group last week. The report, titled “”The Burden of Borrowing,”” examines the difficulty students have in paying off debt after graduation.

    Research for the report came from the Higher Education Project, which is a branch of the State Public Interest Research Group lobby group. The report intended to demonstrate that a student’s chances of paying off debts incurred while in college have become slimmer in the last decade.

    Nationally, student debt has nearly doubled since 1992, when the average student owed $9,188, as opposed to $16,928 in 2000, with inflation not taken into account. After inflation, according to the inflation calculator at http://www.westegg.com/inflation, debt increased by 22 percent.

    The report stated that 65 percent of students now rely on some sort of loan to pay for college, as opposed to 42 percent in 1992.

    The report, based on figures obtained from the U.S. Census Bureau and the Department of Education’s National Center for Education Statistics, cites some possible factors in the increase in student debt.

    The study suggests that tuition hikes have accelerated debt accumulation by U.S. college students. According to the report, which took inflation into account, median income in the United States has increased by 12 percent over the last decade — tuition for four-year public universities has increased 40 percent in the same time. However, if inflation is taken into account, tuition costs only 15 percent more than it did in 1992.

    Because of the rise in tuition, financial aid is becoming a less significant financial force for students. Pell Grants have lost buying power over the last 25 years. A student could rely on a Pell Grant to cover 84 percent of tuition costs at a four-year public institution in 1976, as opposed to only 37 percent today.

    “”Ten years ago, there were more grants given out than loans,”” said Merriah Fairchild, CalPIRG’s higher education advocate and a former student who depended on financial aid to pay for tuition. “”Since then it has switched, and the lack of grants has really hurt students trying to make ends meet.””

    The report is part of State PIRG efforts to raise awareness that a greater cross-section of the population is pursuing a higher education, while fewer and fewer students can afford to do it.

    “”This report was conducted to help Congress and our state legislatures understand the basic realities for students to pay for school,”” Fairchild said.

    Fairchild contends that people in the United States recognize the importance of a college degree but may not realize the financial consequences of a higher education until they are well-indebted.

    “”A college degree is worth 75 percent more than a high school diploma, or over $1 million in a lifetime,”” Fairchild said. “”However, college costs continue to swell into increasingly shouldering high levels of debt. All too often this debt becomes a ball and chain for students after graduation.””

    According to the loan industry, student loan payments are considered unmanageable if they comprise over 8 percent of one’s monthly income. The overall rate of college graduates with unmanageable debt is 39 percent. The proportion of African-Americans and Hispanic students with unmanageable debt is even more severe, at 55 percent and 58 percent, respectively.

    Vincent De Anda, director of the financial aid office at UCSD, said that about 4,900 UCSD students are receiving $13.9 million of federal money in Pell Grants, while the state of California offers $13.5 million of Cal Grants to over 4,500 students at UCSD.

    De Anda said the CalPIRG report reflects the debt problems faced by many U.S. students, but that the situation at UCSD is better than most. The average debt incurred by UCSD students upon graduation, he said, is $13,275, which is about $3,000 less than the national average. He also noted that the Stafford Loan default rate is only 2 percent at UCSD, while the national average is 4.6 percent at four-year public universities.

    “”The low default rates here are impressive,”” De Anda said of UCSD, where over 10,000 students receive the federally issued Stafford loans in excess of $38 million. “”The rates suggest to me that students that graduate from here are going out and finding ways to pay off their debts.””

    Muir senior Jennifer Denilo relies on a Pell Grant, a UCSD grant-in-aid, and two subsidized Stafford Loans to assist her in paying tuition at UCSD. Denilo’s plans for postgraduate school will likely be postponed because of the debt she will start repaying when she graduates.

    Warren sophomore Megan Birney will face a similar situation after graduation. While she is still undecided about her future, she knows that her options after graduation are limited because of the debt accrued by her unsubsidized Stafford Loan.

    “”I know that I can always go back to school later if I want,”” Birney said. “”I’d prefer to deal with my debt as soon as possible, because I know it’s going to be a challenge to pay back even if I’m working as soon as I graduate.””

    Birney said that she has been saving money each month from her part-time job now so that she will be ready to pay her loan, which is deferred until after she graduates.

    Tracey King, an author of the Burden report, said that tuition at schools is forced to keep up with the rising costs of those institutions, and that state governments are not always capable of subsidizing the costs, especially in rough economic times.

    King stressed that while Burden advocates a stronger supplemental force for higher education, chances of increasing federal and state funding for student financial aid are going to have to wait out the current economic slump.

    The Affordable Student Loan Act is being proposed in the U.S. House of Representatives. The act would save about $700 per student by effectively eliminating origination and insurance fees on student loans. King said that the depleted economic conditions of national and state budgets will decrease the priority of the bill.

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