MINNEAPOLIS (WCCO) — Forty-three million Americans have some kind of student debt, which is about one in every six adults.
That debt adds up to $1.6 trillion. It’s less than mortgage debt in the United States, but more than credit cards and car loans.
Student debt is up from $480 billion in 2006. For the average undergrad borrower, that averages out to $29,000. For graduate school debt, it’s $66,000.
WCCO spoke with Joyce Serido, who researches family finance at the University of Minnesota.
“This is not something that all of the sudden just happened. It didn’t happen because young people were being irresponsible, though maybe some were,” Serido said. “It didn’t happen just because colleges are raising tuition, although the costs are going up.”
So what did happen? In the 90s, the government made it easier to get loans. The idea was to get more people who wouldn’t have the chance to be able to go to college — and it worked.
“Everyone was thinking that, ‘No problem, you could get a college degree, you get a good job. you pay it back,’” Serido said. “And then the financial crisis in 2008 hit, and a lot of students were graduating from college and not able to find a job.”
That made it harder to pay off debts.
“The way our system is set up right now, the interest on those student loans accumulates,” she said.
And if someone can’t make the full payment, Serido has seen a $10,000 balance easily become $21,000.
This was all happening as tuition rose faster than inflation. Parents borrowed more, which has tripled in the past 25 years. Loans for for-profit schools also increased. Grad school debt has seen the biggest jump, while undergraduate borrowing has stayed relatively constant.
“We didn’t get here overnight,” Serido said. “It took us a good 30 years to get here, and so any solution to get us out of this is going to be complex and delicate to move forward.”
Experts say beyond debating cancelling student debt, we need to talk about how the interest operates on these loans, the high cost of college, and who benefits from wiping out student debt. Is it professionals with grad degrees who can possibly pay, or those under significant financial strain?
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Source: CBS Minnesota