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 27, 2001

For More Information:
Liz Hitchcock
/ Tracey King (202) 546-9707

Big Student Loans Causing Bigger Problems
PIRG Report Finds Students Underestimating Impact of Student Loan Debt

Despite the fact that students are going deeper and deeper into debt each year to pay for college, nearly 8 out of 10 students do not have a clear understanding of the implications of the debt they take on, according to a report released today by the State PIRGs’ Higher Education Project.

Analysis from the General Accounting office found that over a recent three year period, the numbers of students graduating with debt over $20,000 nearly doubled. The PIRG survey of 1,012 currently enrolled student borrowers showed that 78 percent of students underestimate the long-term cost of their student loans.

78% of respondents underestimated the total cost of their loans, and on average will graduate with $4,846 more debt than they expected. Freshman, sophomore and low income students underestimated their debt more significantly than their peers and were most likely to fall in to the trap of growing debt.

“In this economy, a college education is the best investment you can make in your future,” said Ivan Frishberg, Director of the State PIRGs’ Higher Education Project. “But with big loans come big problems. Students are forced to take out student loans to pay for college but most will end up with significant sticker shock when it comes time for repayment,” he continued.

Speaking at the event where the report was released, Congressman George Miller (CA), Ranking member of the House Education and the Workforce Committee said, “Student loans are often young adults' first experience with personal credit, so it's not surprising that many students are hit by sticker shock at graduation. Students saddled with large debts may think twice before entering public service or postpone the purchase of a first home. We need to restore a balanced, shared responsibility for college costs by increasing Pell grants and making student loans more affordable.”

Although many students continue to face unmet need even after available financial aid, this report suggests that they are not prepared to take on more debt to pay for college. Students, especially those in the first and second years of college, are borrowing without an understanding of the consequences of their debt, and larger debt only compounds the problem. In order to help students pay for college without increasing their debt load, PIRG advocates making more grant aid available, providing cheaper loans to students, and maintaining flexible repayment options.

Jing, a 1999 graduate spoke at the event. “I knew my loans were going to be huge, I just didn’t realize how it would add up and how difficult it would be for me to pursue the career I wanted – it still plagues me and I hope that I made the right decisions,” said Jing. Since graduation, Jing has worked with two public service organizations, teaching civics and environmental citizenship to high school and college students.

“Students with high levels of debt are already vulnerable to problems repaying their loans after they graduate. Now that we know they don’t even realize the severity of their situation, we should be doing a lot more to put a lid on rising student debt,” concluded Frishberg.

The State PIRGs and the Student Aid Alliance are urging Congress to adopt a $600 increase in the maximum Pell Grant, from $3,750 to $4,350. The Pell Grant is the cornerstone federal student aid program. The State PIRGs are also advocating that the final tax bill provide for a $1,500 tax credit for interest paid on student loans.

The State Public Interest Research Groups are non-profit, non-partisan public interest advocacy organizations with chapters on 100 college campuses.