Student loan debt exceeds credit card debt as college costs rise

an illustration of a hand stuffing money in a mortarboard

Student loan debt has outpaced credit card debt as college costs rise and some wonder whether going in hock for a bachelor's degree is worth it. Think Stock illustration.

Americans now owe more for their student loans than their credit card debt. While people are paying down their credit card balances in the aftermath of the financial crisis, college costs continue to rise. Some analysts say less consumer protection for student loans than other types of borrowing is a reason for the trend. Others say college costs have risen beyond the return on investment in student loan debt. Meanwhile, research shows that most of the top growing job fields don’t require a bachelor’s degree.

Student loan debt rises with college costs

Americans owe about $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. The Wall Street Journal reports that student loans outstanding today total about $829,785 billion, as compiled by FinAid.org. Mark Kantrowitz, publisher of FinAid.org and FastWeb.com, told the Journal that he estimates $300 billion in federal student loan debt has been incurred in just the last four years. With college costs increasing rapidly and the duration of unemployment increasing, many parents borrow to make up the difference.

Student loans lack consumer protections

Student loan debt can be more dangerous than credit card debt. Student loans usually can’t be written off in bankruptcy. And some student loan repayment terms inflict harsh penalties for borrowers who miss payments. According to Student Loan Justice, federal student loan borrowers have none of the consumer protections that come with credit card debt, including statutes of limitations, truth in lending laws, state usury laws and fair debt collection statutes. The group calls student loan lending “an inherently predatory lending system that succeeds when the students fail.”

College costs drain family finances

Student loan debt is rising along with college costs. Bank Investment Consultant reports that average total college costs for 2009-2010 were $35,636 at private universities and $15,213 for in-state students at state colleges. These costs have been rising by about 5 percent a year. Many top institutions have announced that total charges will top $50,000 in the current academic year. To cover such costs, families may have to use current income and spend savings as well as borrow money.

Bachelor’s degrees net poor returns

Rising student loan debt leads some to wonder whether going in hock for years to get a degree is worth it. The New York Times reports that no more than half of students who began a four-year bachelor’s degree program in the fall of 2006 will get that degree after paying tuition for six years. Of the 30 jobs projected to grow at the fastest rate over the next decade in the U.S., only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics. Among the top 10 growing job categories, two require college degrees. Richard K. Vedder, founder of the Center for College Affordability and Productivity, told the Times that 15 percent of mail carriers have bachelor’s degrees, according to a 1999 federal study. He said

“Some of them could have bought a house for what they spent on their education.”

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