Graduation day is nearing for the Class of 2013 and some students will begin life after college with a burden of student loan debt.
Students across the country depend on financial aid to pursue their education at universities such as N.C. State, but student loans are becoming a significant liability for a growing number of Americans. According to data from the Federal Reserve Bank of New York, 37 million people share $1 trillion worth of student loan debt.
Student loan debt is the only form of debt to grow since the peak of the consumer debt crisis of 2008. Student loan balances have also surpassed car loans, credit card loans and mortgages, according to a report aired by National Public Radio.
The New York FED released a Household Debt and Credit Report that has a special section on student loans which gives an analysis on the increase of debt financed education.
“Higher education is crucial to improving the skill level of American workers, especially in the face of rising skill premiums and a relatively unfavorable labor market for less skilled workers,” the report stated. “Due to increasing enrollment and the rising cost of higher education, student loans play an increasingly important role in financing higher education, and student debt is the only kind of household debt that continued to rise through the Great Recession.”
Fifty-five percent of the N.C. State class of 2011 graduated with an average debt of $17,317. The cost of tuition has risen since then and from this year to the next the expected cost of attendance will change from $20,644 to $22,184, thus student debt will be expected to rise in future years.
Richard Wolfe, a sophomore in economics, will begin to bear the burden of student loans to pay for his education starting next semester. “The obvious thought is hopefully I can pay these back comfortably,” Wolfe said. “I don’t like the idea of taking loans, but I know it’s necessary.”
Are N.C. State students naive when it comes to student loans? Wolfe says he understands the terms of his loans, but it is impossible to generalize if all N.C. State students understand all the terms and complications involved with their loans such as the repayment options that are available and what current interest rates are.
However, N.C. State graduates have a 3.2 percent default rate which is far lower than the national average of 13.4 percent.
Krista R. Domnick, Director of the Office of Scholarship and Financial Aid, used student loans to finance her own higher education and she has advice for students that have student loan debt. “Be careful with your borrowing decision and borrow the minimum amount that you need, so you can enjoy the fruits of your education later in life without burden of a lengthy student loan repayment.”
The Office of Scholarship and Financial Aid can provide help to students who are seeking more information about loans and looking to learn about different repayment options they have. Domnick said students need to be informed and it is important to read and understand the fine print when taking out a loan.
Subsidized Stafford Loans are expected to double beginning July 1 to 6.8 percent unless legislation is passed against the increase.
Some lawmakers have made efforts to cap the loans at 3.4 percent interest and have even come up with some loan forgiveness measures such as the student loan fairness act which has been referred to committees within the U.S. House of Representatives.