Students are drowning in debt

By Schumpeter

THIS year American student-loan debt surpassed credit-card debt for the first time. More students are borrowing more money than ever before in order to buy a commodity that is often of dubious value. They are borrowing the money from increasingly dodgy lenders. This 2009 briefing, "Drowning in debt: the emerging student loan crisis", from Kevin Carey and Erin Dillon, provides plenty of details, along with 15 charts:

Higher education has never been more expensive. The price of attending a public university doubled, after inflation, over the last two decades, and family income and student financial aid haven't kept pace.¹ As a result, students have no choice but to borrow, and more college students are borrowing more money than ever before.

But a new analysis of federal financial aid records reveals more than just surging debt levels. Students are taking on more of the riskiest debt: unregulated private student loans. Here, students have the least protection and pay the highest rates. For-profit colleges are leading the way in this trend, and minority college students appear to be borrowing a disproportionate share. If this continues, the consequences will be severe: reduced access to higher education, diminished life choices, and increasing rates of catastrophic loan default.