Student Borrowers Face Grim New Reality

NEW YORK (MainStreet) — Because Congress couldn't settle its differences, 7.4 million college students saw the interest rate on student loans double to 6.8% on Monday. Debt on student loans, already an astounding $1 trillion, will grow even higher, dampening debtors' financial prospects for years, in many cases for their entire lives.

A study by the Urban Institute shows how seriously people take this issue. About 20% of Americans have student debt, and 57% of those worry about being able to make payments.

This worry spans all categories. As one would expect, it is highest among those earning $25,000 a year or less — 72%. But a full 36% of those earning $100,000 or more are worried about making payments.

Various studies have shown that student debt prevents people from buying homes, getting married and saving for retirement. A high level of worry can make these problems even worse, even if the debtor is able to make payments.

Student loans are often called "good" debt", because education is an investment that leads to higher earnings and more job flexibility. But deep in the Urban Institute report is a figure that its not so simple:


"On average, the benefits of post-secondary education outweigh the costs for people able to complete their degrees, although roughly half do not complete their degrees."

Half? Wow! That means students are piling on debt that won't pay off.

The report says that half of the students who failed to get the BA degrees they'd expected to earn had student debt averaging $14,457.