Student Borrowing on the Rise

More than half of bachelor’s degree recipients graduate with debt averaging more than $20,000.

College costs have skyrocketed over the past decade, rising faster than the overall rate of inflation. According to the College Board, the average annual cost of a four-year public college, including tuition, fees, and room and board now runs $17,131. The same fee at a private school is now a staggering $38,589.1

The steep rise in costs has occurred at a time when household income has stagnated. A new report by Standard & Poor’s, The College Affordability Crisis: How Bad Could It Get?, examines the difficulties students now face and suggests that the resultant ballooning level of student debt could pose issues down the road.2

Student Borrowing Has Exploded

After a lull during the Great Recession, when consumers began to borrow less, debt loads are increasing again, with much of the rise attributable to student loans. First-year, first-time college students are taking out nearly double the level of loans they did a decade ago, even with higher levels of scholarship and non-loan aid. Student loans at all schools for first-year students during the 2008-2009 school year, the latest year for which statistics are available, totaled $6,974, compared with $3,764 in 2000-2001. All figures are in 2010 dollars.

Currently, the College Board estimates that 56% of bachelor’s degree recipients at public schools graduated with debt averaging about $22,000, and 65% of those from private schools have debt averaging about $28,000. And it is no longer unheard of for a student to borrow upwards of $100,000 to get a bachelor’s degree.

What all this means for today’s college graduates is an increasing debt burden in the years ahead. In an economy where fewer new entry-level jobs are being created for college graduates, it is likely that a growing number will default. Already, default rates are rising. According to the U.S. Department of Education (DOE), 8.8% of all students with Federal Family Education Loan Program or Direct Loan student loans, and whose first loan repayments were due between October 1, 2008, and September 30, 2009, defaulted before September 30, 2010. Although the DOE cautions that this figure is “a snapshot in time,” the default rate in the previous fiscal year was 7%, and the 8.8% default rate is the highest since 1997.

How this translates to future defaults or how it impacts college pricing moving forward remains to be seen. But certainly it is not getting easier for today’s students.



1Source: The College Board, 2011/2012 academic year. Total cost includes tuition, fees, and room and board.

2Source: Standard & Poor’s, The College Affordability Crisis: How Bad Could It Get? February 2012.

Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is notresponsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2012 S&P Capital IQ Financial Communications. All rights reserved.

photo by: Jason Bache
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