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The Madera Tribune

The surprising rise in student loans

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webmaster | 06/11/12

One big surprise in our economy is the rapid rise in the total amount of student college loans. Student loan debt, according to information from the Federal Reserve Bank of New York, now totals about $1 trillion, compared to credit card debt of about $675 billion and auto loan debt of about $730 billion.

A lot of that student debt, perhaps the majority of it, was acquired by people who had little or no idea of how hard it was going to be to pay off.

Car loans usually are quickly translated into a monthly car payment by those who enter into them, and they do their best to fit those payments into their monthly budgets. Credit card balances are usually the result of somewhat budgeted purchases, and the borrower also knows his or her credit card will “max out” quickly if sufficient payments aren’t made on time.

But those who incur student loans usually only face the repayment music when college is behind them.

Many of those borrowers don’t graduate, and therefore have little to show as a result of their debt. Others with newly minted degrees find their starting salaries inadequate for budgeting the repayment of loans that can exceed $200,000 in the case of a professional education such as law or medicine.

Student loans aren’t dischargeable in bankruptcy, and if the payments become overdue, that can result in credit for other things, such as homes and cars, being hard to come by.

Part of the reason student loans are increasing is that college costs are increasing at more than twice the rate of inflation. Also, it’s taking longer to get through college — five or six years for a bachelor’s degree in many cases.

Student loans are handy, but borrowers should make sure they know how they will pay them off before they sign on the dotted line.


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