Debt and Degrees: College Grads Owe More Than Ever

The amount of money college grads owe on their student loans just keeps rising. According to the sixth annual report from the nonprofit Project on Student Debt at the Institute for College Access & Success, the average graduate from the class of 2010 owes $25,250—a five percent increase from the previous year. That should come as no surprise to those who have tracked the nation's total student debt rapidly approach $1 trillion. What's especially notable about TICAS' findings this year is the variations researchers found based on where people live and how they borrowed money.

TICAS' data shows that students in the Northeast and Midwest states had the highest average debt. New Hampshire students have the highest average debt, at $31,048, followed by Maine with $29,983. Seven out of the 10 states with the lowest average debt are in the West, with Utah first at $15,509 and Hawaii a close second with $15,550.

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What's driving the discrepancy? The report notes that "a larger than average share of students in the Northeast and Midwest attend private nonprofit four-year colleges," while their peers in Western states "have a larger share of students attending public four-year colleges."

But given the ongoing budget cuts at public colleges, that trend could start to change. Public university tuition in budget-crunched California is skyrocketing—it could increase 16 percent a year over the next four years. And the state's 11.9 percent unemployment rate is one of the highest in the country, meaning that students and families will undoubtedly have to borrow more to make those increased tuition payments.

The key difference is whether students borrow from the federal government or private lenders: "How you borrow, not just how much you borrow, really matters," cautions TICAS president Lauren Asher. Paying for college expenses with a private loan is just like charging it all to a credit card. The interest rates are typically uncapped, and borrowers won't be able to take advantage of the debt relief policies recently fast-tracked by President Obama.

Colleges are now required to post net prices on their websites, and TICAS recommends that the Department of Education go one step further by publishing annual loan repayment rates and data on whether a school's educational programs or majors typically lead to jobs at salaries that allow repayment. That would make it easier for students to make well-informed decisions about what kind of degree they want to pursue, and whether they'll be able to afford it.

Photo via (cc) Flickr user DonkeyHotey