CONTACT: Gretchen Wright 202/371-1999
The College Board report shows that the trends in how Americans pay for college continue to tilt heavily toward loans. The largest increase is in private loans, which rose by about 30 percent in just one year, a strong indicator that more families are finding that they have little choice but to borrow in order to cover the rising cost of college.
The College Board report documents the continued rise of loans and the relative decline of need-based grants, meaning that the people who struggle hardest to get a college education have fewer and fewer options. To fully understand the importance of this trend, it is necessary to also consider how interest rates affect the debts that college students and their parents take on. Last year, many students and graduates took advantage of the opportunity to lock in low, 3.37 percent interest rates on federal loans. That option is gone, and an interest rate of 6.8 percent or higher is possible next year. That rise would increase borrower payments by more than 18 percent for the same amount of debt. Interest rates on private loans are generally much higher.
The growing reliance on more, and more expensive, loans begs the question: How much student debt is too much? It is more important than ever to examine how rising debt affects college access, career choices, and family finances. These are issues we need to face, because America risks losing its competitive edge in the global economy if we fail to provide advanced education and training to our citizens.
See the College Board's report as a pdf
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For Americans of all socioeconomic backgrounds, borrowing has become a primary way to pay for higher education. The Project on Student Debt works to increase public understanding of this trend and its implications for our families, economy, and society. Recognizing that loans play a critical role in making college possible, the Project's goal is to identify cost-effective solutions that expand educational opportunity, protect family financial security, and advance economic competitiveness. For more information, go to projectonstudentdebt.org.