If asked, most Americans would guess that credit card debt is the number one source of debt for Americans. They would be wrong. For the very first time student loans have topped credit card debt as the number one source of debt in the nation.
The Institute for College Access and Success recently released a study which reported a 2009 average student loan debt of $24,000. The 2009 average is up 6% from the 2008 academic year. And to make matters even worse, the rate of unemployment from 2008 to 2009 grew nearly 3%, from 5.8% to 8.7%. To put it simply, “college students are graduating with a heavier debt burden and heading into an economy with fewer jobs.”
What can be done about today’s students’ enormous loans and low repayment rates? according to the Bakersfield news here’s a place to start “we need to guarantee that loans are reasonably accessible, eliminate hidden obligations, limit interest rates to levels that don’t immediately plunge entry-level workers into overly daunting debt and structure repayment plans that are fair and manageable. We must also find ways to craft financial-aid packages so that a student’s debt is never allowed to balloon into an inescapable trap.”
A required finance course in high school is another idea. Says one Statenews.com contributor “just as high school counselors are prompting students to take the ACT and SAT, sessions should be given to potential college students explaining what exactly they’re getting themselves into financially.”
Financial education is imperative if we want to stop and reverse the astronomical and crippling rise of student debt. By educating students early (and often) on the perils of debt and the multitude of financial options available to fund higher education, unnecessary debt and years of making minimum payments can be eliminated.