State PIRGs' Higher Education Project
218 D Street SE
Washington, DC 20003
(202) 546-9707

Director:
Ivan Frishberg

Advocate:
Ellynne Bannon

 

For Immediate Release:
March 7, 2002

Contacts:
Tracey King
Ellynne Bannon
(202) 546-9707

Student Loan Debt is a Ball and Chain for Many Graduates
PIRG analysis shows that many student borrowers are graduating with unmanageable levels of debt

An estimated 39% of student borrowers are graduating with unmanageable levels of student loan debt, according to "The Burden of Borrowing," a new report by the state PIRG's Higher Education Project. The analysis, based on data from the Department of Education's National Postsecondary Student Aid Study, also shows that the average debt among student borrowers has nearly doubled in the past decade to $16,928.

Unmanageable debt is defined by a loan industry recommendation that monthly student loan payments not exceed 8% of a borrower's monthly income. The analysis was based on data from the 2001 U.S. Census, which listed the average income of 18 to 24-year-olds with Bachelor's degrees working full-time and year-round in 2000 at $32,101.

"Too often debt burden becomes a ball and chain for student borrowers after graduation. Many student borrowers are taking on unmanageable levels of debt to finance a higher education." said Tracey King, the State PIRGs' Higher Education Associate.

The report also found that some groups of students are disproportionately likely to face debt burden. For example, 71% of students from families with incomes less than $20,000 graduated with debt, compared to 44% of students from families with incomes more than $100,000. In all likelihood, low-income students more often also experience financial hardship after graduation due to less financial support from and more financial obligations to their families after graduation.

"Debt levels are skyrocketing, and as a result, many students are graduating with unmanageable debt burden. The situation is even worse for certain groups of students, who are likely to experience even more difficulty repaying their loans," said Tracey King. "Congress should take immediate action to protect these students from dangerous debt burden by increasing grant aid funding and making student loans more affordable," added King.

King also noted that the figure for students who graduate with unmanageable debt burden is a conservative estimate because it does not factor in other types of debt, such as private loans and credit card debt. In addition, monthly payments for half of all student borrowers are even higher due to interest capitalization on unsubsidized loans.

State PIRGs are non-profit, non-partisan public interest advocacy groups. The Higher Education Project was established in 1994 to secure more aid for students, with a focus on additional grants, reduced debt, and better service to students in the federal financial aid system. www.pirg.org/highered