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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.
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