Borrowers Pulling Back ... But Not on Student Loans

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By Candice Choi, AP Personal Finance Writer

NEW YORK (AP) — Americans are shouldering bigger debt loads to pay for college. That's even as they've pulled back on every other category of borrowing in the past three years, including mortgages, auto loans and credit cards.

Here's a look at what's happening:

The Story in Numbers

Total student loan debt was $550 billion at the end of the second quarter. That's up 25% from $440 billion in the third quarter of 2008 when total household debt was at its peak, according to the Federal Reserve Bank of New York. Total household debt, by contrast, has since declined by almost 9% to $11.42 trillion from $12.50 trillion.

The reduction in overall household debt is partly the result of tightened lending standards and banks writing off bad loans. But student loans still stand out as the sole debt category that has grown at a steady clip.

The Numbers in Context

The rise in total student loan debt is being fueled by a recessionary climate. For starters, college enrollment tends to swell whenever the job market is tight. The ranks of needy students are growing as well, notes Mark Kantrowitz, publisher of Finaid.org, which tracks the student loan industry.

Last year, for example, nearly 9 million students received Pell Grants, which primarily go to students with a household income of less than $40,000. That's up from about 6 million in the 2008-2009 school year.

In fact, Kantrowitz says the New York Fed's figures likely underestimate the growth in student loan debt. That's because the figures are projections based on a sample of debt profiles from Equifax, a credit reporting agency. He noted that the figures also do not include the significant interest costs that accrue while students are in school.

The amount of debt per student is growing too. Among those who graduate with student loans, the average debt level was $24,000 in 2009, according to the Project on Student Debt. About two-thirds of students graduate with loans.

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