Student Debt Increases as Average Salary Decreases

Student loan debt is the one type of debt Americans haven’t cut back on in the recent economic crisis. According to the Wall Street Journal, outstanding student debt is up 25% since 2008, now at a staggering $550 billion, while other kinds of debt, such as credit card debt and auto loans, have decreased.

Additionally, the percentage of student loans that aren’t being paid off on time has been increasing steadily since the beginning of 2003, when only 6.5% of loans were delinquent. The first quarter of 2011 showed that 11.2% of student loans are now delinquent, according to the Federal Reserve Bank of New York. But while that rate is the highest it’s been in eight years, it is still lower than a spike in 2002, when 18.6% of all student loans were delinquent.

Still, the Huffington Post cited warnings from experts that a higher education bubble might be imminent. Reporting information from a Rutgers University study released in May, the Post stated that while the average starting salary for those who graduated from college in 2006 and 2007 was $30,000 annually, those who graduated in 2009 or 2010 start making only $27,000 per year.

A Washington, D.C.,-based think-tank, Education Sector, released a study that analyzed and encouraged potential students to think about what they call "the Borrowing-to-Credential Ratio." The ratio is a picture of the value of a degree earned at a particular institution, and it is rising across the board, but not equally.

The study looked at all institutions based on three years of data. On average, schools that offer four-year degrees more than double the ratio at schools that only offer two-year degrees, such as community colleges. While four-year degree public universities average a ratio of $16,427 in debt-per-degree, private four-year degree universities have an average ratio of $21,827. For-profit schools nearly double the ratio, by producing an average debt of $43,383 per degree. The ratio is hardly representative of every for-profit college and every student, however, as six major for-profit systems produce less than $30,000 in debt per degree.

For-profit schools contend that their students face debt equal to the national average. On its website, the University of Phoenix states that it "promotes responsible borrowing practices and is committed to reducing student debt." The school states it just introduced a financial literacy program that has reduced the number of students who take out the maximum loan amount by 30%. For-profit schools maintain that their students are offered opportunities they can’t get at other schools, such as online certification and degree programs with flexible schedules, career-based training, and assistance in job searches.

Overall, however, it remains true that regardless of potential debt incurred, recent data shows it is still beneficial to have post-secondary education. According to the U.S. Bureau of Labor Statistics, unemployment rates continue to increase for those who have not graduated high school and those with a high school diploma or equivalent. Unemployment statistics for workers with less than a bachelor’s degree but more than a high school diploma have remained fairly steady, while unemployment rates for those with a bachelor’s degree or higher are fluctuating but decreasing on the whole.

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