student debt

Recent shifting trend in Student Debt

According to new statistics, Americans are facing around $1.5 trillion in form of student debt. Millions of youngsters are in-default and many new graduates are facing financial problems due to being in debt that limit their ability to create life they deserve or could. For some, debt is stopping them to buy new homes or start families on their own. Some companies offer help to student to enroll in federal programs that consolidate their student debt for some fee.

A shifting burden

A new analysis report suggest a slight decline in student debt loan, at least when adjusted for inflation. But this isn’t true for many parents. Some employers have begun to offer “Student debt repayment” benefits to potential employers. This may sound like a good news but reality is different than what it seems at surface. As colleges are becoming expensive, many parents decided to dig deeper into debt to pay their kids college fee. This is case, especially for students pursuing their under-graduate course.

For students receiving bachelor’s degrees, the average debt load at graduation was $30,301 in 2015-16, which is almost the same as previous year. Mark Kantrowitz, the publisher and vice president of research at SavingForCollege.com, ran the numbers. He believe that many students simply can’t borrow any more money they have already borrowed through the federal loan program. More than 40 percent of students in 2015-2016 year has reached the limit of $31,000.

Government has raised limit of loan for independent students up to $57,500 – those whose parents can’t get federal parental loans or don’t have anyone to support them. The percentage of students availing the higher maximum loan amount has also increased up to 7.4 percent in 2015-2016, up from 5.6 percent in 2011-2012 and only 3.3 percent in 2007-2008.

Meanwhile, parents’ average debt load at graduation for federal PLUS loans rose 14 percent, or $4,090, to $33,291 in 2015-16 from 2011-12. “Parents are a pressure-relief valve for when students hit the Stafford loan limits,” Mr. Kantrowitz said, referring to the federal loan program.

Although the parental debt has increased significantly, the number of parents utilizing the federal plus loans has declined by 10 percent in past 4 years. But those who are borrowing need to borrow more because of the increased expenses of colleges. They are also picking more debt to help their kids who can’t take more loans to finance their degrees.

Students are choosing public institutions over private

The data also show a widening gap between students who choose public institutions over private. The biggest reason is off-course cost of these academic institutions. It seem more like a practical approach but it suggests that families are feeling financially squeezed. Parents feel they can’t afford private colleges. The shift from private to public mainly shows the sign of financial pressure on parents.

Bigger concern is about students who are opting for associate and certificate programs instead of bachelor’s degree programs. Students who could actually get benefit from student debt loan are choosing not to apply and studying certification programs over degrees.

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