As a rule, most of us like to think we’re above average. This aspiration holds true for intelligence, looks and income – but not so for student loans. Late last year, when 2011 numbers were released, we learned that individual student loan balances averaged $26,600 and that was bad enough. But the news for 2012 is drastically worse! In just one year, average loan balances leapt by a staggering 10%.
Student loan borrowers now face, on average, $29,400 in debt. On a 10 year standard repayment plan at 6.8%, this means $340 per month payments – and can be drastically more with higher interest rates! At the end of the decade of payments, interest paid will be more than $11,200. And if a 10 year plan isn’t feasible and you have to pay it off over a longer period, the interest will grow astronomically.
This data was released by The Institute for College Access and Success (TICAS) in their report Student Debt and the Class of 2012. The report broke down results by state and revealed that South Dakota had the highest percentage of borrowers – 78% of SD graduates come out of college with debt. But it’s Delaware that has the dubious distinction of producing the most in-debt borrowers – average debt there is $33,649.
TICAS data is all voluntarily reported and is comprised of mostly public and private non-profits. Private for-profit schools largely choose not to participate. If they did, the average would be much higher and more disturbing. In addition to TICAS collecting and crunching the data, they included six recommendations to stem the rising tide of student debt that we heartily agree with.
Below are their suggestions and our thoughts on them:
#1 Reduce students’ need to borrow
This suggestion includes doubling Pell Grant amounts. This would be a great use of the big bucks the Federal government is earning from student loan interest. Why not reinvest in the same system that’s producing the revenue?
#2 Provide students with key information when they need it
This recommendation involves giving students and parents the information they need to make wise decisions about what schools are affordable given their budget and available financial aid. This is critical to know before they borrow!
#3 Collect better data on student debt and outcomes
This suggestion includes collecting accurate and detailed data on total debt accumulated by institution, graduation rates and career and salary prospects for graduates. This will allow students to make informed decisions based on expected outcomes.
#4 Strengthen college accountability
This recommendation is premised on holding schools more accountable for ensuring their students receive a quality education and a degree that will enable them to pay the debt it took to earn that degree. Schools that fall short would see federal funding cut or eliminated!
#5 Reduce reliance on private loans and strengthen consumer protections for private loan borrowers
This suggestion addresses a huge area of concern since private loans are at higher rates and offer few protections. TICAS would like to see (as would we) private loans dischargeable in bankruptcy, greater availability of refinancing and confirmation that federal loans have been maxed out before issuing costlier private loans.
#6 Improve and promote awareness of federal loan repayment options
This recommendation wants to make the most of programs already in place to help struggling borrowers including income-driven repayment plans like IBR and PAYE. They suggest heavier promotion of these plans along with enhanced student loan counseling. They also suggest having PAYE as the sole plan but open to all with its 10% payment cap and 20 year forgiveness.
Student loans can be life altering for the good – by allowing you to get an education – and life altering for the bad – by crippling your finances and taking over your life. We applaud TICAS for gathering and analyzing this all-important data and making it available to raise awareness of the ongoing student loan crisis. To help get control of your student loans, sign up for our free student loan tool to manage and optimize your debt. Be sure to read our blog for news and check out our Student Loan Help Center for great guides and info.