Student Debt

1826 Words Dec 4th, 2007 8 Pages
INTRODUCTION

This report examines the increasing trends in the amount of debt students are graduating with. The purpose of this report is to prove why these trends need to be stopped, and how they can be stopped. After viewing the statistics from 1993 to the present it will be obvious that student debt is not rising at a steady pace, but that its growth is leading to large financial burdens by many students. Recommendations are given about the actions that can be taken by not only students, but everyone to help improve this dire situation. The changes that student loans have been through over the last couple of years will have a lasting effect on current students, prospective students, parents, and those who have graduated and
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This could be a matter of convenience due to things such as online registration systems at some colleges. Other scenarios include students exhausting the lower cost methods of paying for tuition such as student loans or payment plans (American Council on Education).

Source: American Council on Education Issue Brief – July 2006
Figure 2. Credit Card Ownership and Behavior of Traditional-Age Undergraduates

ANALYSIS OF CAUSES OF INCREASING DEBT TRENDS

Reduction in Student Aid Programs

Student aid programs are being cut. The Pell Grant, which is set at $4050 per year for qualifying students, is suffering. Because of the lack of increases in the Pell Grant, the buying power of this grant is decreasing. It no longer is able to keep up with inflation rates (Talia Berman).

Increases in Interest Rates

In February, 2006, the Deficit Reduction Act passed through legislation. This act would ultimately cut $12 billion from federal student aid. This act increased interest rates on student and parent borrowers. The Stafford Loan interest rates rose from 5.3% to 7.14% on existing loan and 6.8% on any loans taken out after this act passed (Talia Berman). What this act did do was lower income taxes to those that made more than $1 million!

Rising tuition

Over the past five years, tuition has risen by 40%. Since the 1970 's, tuition has actually tripled. When
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