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U.S. Student Loan Debt Exceeds Credit Card Debt

The Wall Street Journal reports that total student loan debt has exceeded credit card debt for the first time. The Federal Reserve reported that Americans owe approximately $826.5 billion in revolving credit, and student loans—both federal and private—total some $829.785 billion. It is estimated that $600 billion of the student loan debt is made up of federal loans, while $167 billion is private loans. Almost $300 billion in federal debt is from the last 4 years alone. The phenomenon can be attributed to a combination of exploding student loan debt and the fact that more Americans are paying down their credit cards and being more frugal.

Department of Education Releases Analysis Data for Gainful Employment Rules

The U.S. Department of Education (ED) has released the data and technical documentation used for drafting the “Gainful Employment” proposed rules. These rules would place federal aid participation and enrollment growth restrictions on any non-degree programs, mainly at private sector or career institutions, whose students do not earn enough to repay their student loans. In releasing the data, ED cautioned that:

Data on all schools is included in the analysis documents, even though only non-degree programs would be affected by the gainful employment rules; and
Data is grouped at the school level, even though the gainful employment rule, as proposed, would group data at the program level.

The data suggests that the loan repayment rates for many career colleges, as well as vocational programs at nonprofit schools, are lower than many observers expected. Since the release of this data many career colleges are contesting the rates and methodology used in calculating the rates, arguing that ED is counting as “non-paying” those borrowers who take advantage of not only deferment and forbearance, but also debt management programs like consolidation and income-based repayment. ED counters that their methodology takes into account all borrowers who are not repaying the principal on their loans, as this reflects borrower’ true inability to repay the debt burden. The recently released rates will also continue to fuel the longstanding debate on whether loan repayment problems indicate the quality and value of education programs, or the types of students enrolled in the programs.

Obama Touts Plans for Higher Education

President Obama recently spoke to students at the University of Texas Austin about his higher education strategy. His speech was the second in 2 weeks that highlighted the Administration’s initiatives for education that include plans to produce an additional 8 million college graduates by 2020 and reclaim the top spot as the country with the highest percentage of college graduates.

President Obama mentioned student borrowing during his remarks. “The first part of our strategy has been making college more affordable. I don’t have to tell you why this is so important—many of you are living each day with worries about how you’re going to pay off your student loans. We all know why. Even as family incomes have essentially flat-lined over the past 30 years, college costs have grown higher and higher,” said President Obama. “Over the past decade, they’ve shot up faster than housing, faster than transportation, even faster than health care costs. No wonder the amount student borrowers owe has risen almost 25% over the past 5 years.”

“This isn’t some abstract policy matter to me; I understand it personally. Michelle and I had big loans to pay off when we graduated—and I remember what that burden felt like. That’s why I’m absolutely committed to making sure that here, in America, no one is denied a chance to go to college, no one is denied a chance to pursue their dreams, no one is denied a chance to make the most of their lives because they can’t afford it. We are a better country than that, and we need to act like it.”

In his remarks, President Obama touched on efforts to simplify the FAFSA process, increase Pell Grant awards, become more globally competitive through Race to the Top and aid states in efforts to increase degree attainment.

Student Financing Data from the 2007-2008 Academic Year Released

The National Center for Education Statistics issued a set of online tables containing information on the financial aid awarded to undergraduate students attending domestic postsecondary institutions during the 2007–2008 academic year. The data includes average tuition and fees, price of attendance, type of financial aid received from federal, state and institutional sources, net tuition (tuition and fees minus all grants), net price of attendance (price minus all grants), out-of-pocket net price (price minus all aid) and financial need broken down by selected percentiles.