Student Debt – The 2nd Highest Type of Debt in the Nation


According to the latest Federal Reserve Bank of New York (FRBNY) quarterly report, the total amount of national student debt is now $1.16 trillion dollars. In 2013, the FRBNY reported that student debt had surpassed auto loans, and credit cards as the highest kind of consumer debt, outside of mortgage loans. The U.S. Department of Education reports that more than half of first time, and full-time students borrow for college. Their debt has increased by nearly 40%, after adjusting for inflation. This amount of debt, which breaks down to an average of $28,400 per graduate, is crippling to our nation and our nation’s graduates. The amount of debt held by each graduate bears burden enough to delay other milestones like marriage, beginning a family, and purchasing a home or a car.
Students, especially young high school graduates, are often enthusiastic about entering a new phase in their lives, especially in the realm of higher education. Students, and their families, are taking out loans based on the perceived benefit of having a college degree. But how financially literate are these young freshmen about the longer term effect of their loans? In a survey completed by the FRBNY, data shows that many U.S. households have a poor comprehension of the consequences of delinquency on student loans. At the end of this year’s second quarter, the FRBNY found 11.5% of student debt is seriously delinquent, debt comprised of loans with payments overdue by at least 90 days. While the federal Department of Education requires mandatory loan counseling, most of the counsel is too dense and dry for young borrowers to retain. Private lenders on the other hand do not require counseling, even though their loans are supplied with a higher interest rate, and more often than not, without deferment or forbearance options. In the same way we want students to invest in themselves, and their futures, by attending college, we should want them to be prepared for the financial responsibilities they are also taking on.
As we teach students ideas and philosophies to change the future of society, we also need to teach them the basics of day-to-day finances and planning for the future. While students and their families may not fully comprehend the nuances and consequences of taking on loans, they do understand the value of a college degree. The Pew Research Center reports a wide gap between the annual earnings of a college graduate and the annual earnings of a high school graduate, a difference of $17,500. Even though the cost of tuition keeps rising, most college graduates believe that their college education is (or will be) worth the investment. Students, and their families, understand the benefit of earning a college degree. Students deserve a higher education, but they also deserve proper financial counseling to prepare them for the future.

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