By Alex Wilking and Danielle Rodgers
Borrowing money can be an easy solution for students wanting to pay for college. This allows students to get the money now, then worry about it later. But students have now borrowed over one trillion dollars in student loans, exceeding the nation’s credit card debt. And more college graduates are defaulting on those loans, partly because jobs are scarce—creating difficult financial situations for students across the nation.
According to the Columbia Missourian, three out of every 10 college graduates nationally are overdue on paying their loans. Defaulted loans create a deficit that both state and federal government have trouble recovering from. This is especially true for the federal government, since 80 percent of student loans come directly from federal government funds.
Student loan debt has already exceeded one trillion dollars. The average college student owes around $25,000 in loans. And students aren’t limited on how much money they can borrow. But with all the debt held against college students, students continue to borrow money for higher education.
“When the federal or state government reduces the amount of support they provide to public institutions, and higher prices are transferred to students, student borrowing increases,” Webster University chief financial officer Greg Gunderson said. “The state support of higher education isn’t keeping pace with inflation.”
Webster students have racked up student loan debt as well. The university processed over $175 million in federal loans for the 2010-2011 academic year. Webster is about 97 percent tuition dependent, which means the university gets most of its operating money from student tuition.
Many students are concerned about rising interest rates. Interest rates have been low and stable for the past five years, which has encouraged students to borrow more money. The current interest rate on student loans is about 3 to 4 percent, but this number could be on the rise.
An act in congress called the “College Cost Reduction and Access Act” that lowers student-loan interest rates is set to expire July 2012. If congress doesn’t renew this act, interest rates could double for college students hoping to pay off their federal loans.
Student loan debt is continuing to rise. Inflation is raising tuition costs, thus increasing student borrowing. Some families are struggling to pay for higher education because of these rising costs. But the economy is slowly recovering, and with it brings the possibility to recover from the massive amount of student loan debt.
“Our government’s inability to deal with the funding of its debt, and the debt crisis in Europe have extended this recovery time significantly,” Gunderson said. “As inflation kicks in, people who are borrowing can then afford to pay for things.”