Student loan debt goes up 8 percent

The Project on Student Debt hopes to educate students about options.

By Robby Lewis

Published Sept. 28, 2007

Before every fall semester, students go through a grueling process to attain as many scholarships and grants as they can, including student loans, which are easy to get but not as easy to pay back.

According to The Project on Student Debt, more than 5 million students each year will have to take out some sort of student loan.

The Project on Student Debt is an organization whose goal is to educate college students on the repercussions of taking out student loans.

In 2006, the organization began analyzing data on the student debts of the class of 2005, which was obtained through 1,400 four-year colleges.

This fall, the data for the class of 2006 was analyzed, and the organization found an 8 percent increase in average student-loan debt.

At the same time, the starting salary for graduating seniors increased by 4 percent.

The organization's executive director Robert Shireman said these numbers must change, or the value of a college education will diminish.

"The excuse for having student loans is that you make more money as a college graduate," Shireman said. "If these patterns don't change, the costs for college will outweigh the gains."

According to the report, the increase can be attributed to a combination of rising tuition costs, uninformed students and lack of grant money.

Shireman said colleges can help by making sure their students have feasible repayment plans and that grant money can be used to help students with financial needs.

He said the federal government can help by increasing the value of the Federal Pell Grant Program and letting students know where they stand with their current debts.

"Any student under 24 has the option of taking up to $23,000 in federal loans," Shireman said. "The federal government needs to inform them before they get too far in debt."

Shireman said the federal government should require that private loans be displayed to the colleges.

Mark Oleson, director of the MU Office for Financial Success, said he feels that because this study did not include private loans, the numbers are even worse.

"The numbers are misleading because it only shows federal loans," Oleson said. "They can't show private loans, which are an even bigger problem because the debt for these is even higher because students can go get these loans without telling the school."

Oleson said the government and universities need to do whatever is feasible to help students with financial needs, but it is ultimately the student who needs to know how much is too much.

"Tuitions rising is obviously a factor, but it's the mentality of students more than anything," Oleson said.

Oleson said he believes students don't understand their loans.

"They are Greek terms to them," Oleson said.

Oleson, who teaches classes on financial success, believes it is smart for students to not only create an academic plan, but to also create a financial one.

"Students are more likely to fail financially than they are academically," Oleson said. "Students should add up their resources and then check the costs, and this will make you more informed. It won't change your options, but it lets you know what your situation is."

Shireman said "The Project on Student Debt" will continue to analyze the numbers, and he hopes for a change in the trend.

"Students have to stay cautious, because if they aren't, it won't pay to even go to college," he said.