Student debt soars in US

New report says total debt burden doubled in five years

June 25, 2013

Urgent reforms are needed to reduce the rapidly increasing debt burden on US students, according to a new report.

From 2007 to 2012, total student debt in the US nearly doubled from $548 billion (£355 billion) to $966 billion, with the average loan balances of recent graduates rising from $16,425 to $21,402.

A report published by the Manhattan Institute for Policy Research, College Credit: Repairing America’s Unhealthy Relationship with Student Debt, argues that the problem is largely systemic.

Federal financial aid programmes as they are currently set up give colleges “virtually no incentive to lower costs”, the report says, since they know “full well that the government will accept any increase and factor it into the aid award”.

Moreover, “since the price of any college does not necessarily reflect the value of the education that it provides, students and parents are uninformed consumers,” it continues.

“They have almost no power to bring down prices…By insulating colleges from competitive pressure, student loans distort the incentives of colleges and universities.

“The problem of growing student loan debt cannot be addressed without rethinking our federal loan program.”

The report coincides with the publication of new data in the Organisation for Economic Cooperation and Development’s Education at a Glance publication, which shows that in 2010 the proportion of GDP spent on higher education in the US rose from 2.6 per cent to 2.8 per cent. However, the increase was almost entirely down to an increase in private funding, in the form of rising student fee income.

The Manhattan Institute for Policy Research says that in order to get a grip on fee inflation, “student aid should be de-linked from the cost of attending a specific college”.

A revamped student loan programme should instead provide grants calculated on the basis of the median cost of attendance at non-profit private, public and community colleges as well as at for-profit colleges, it argues.

The institute argues that this would have the effect of making colleges more competitive and students more selective while alleviating the pressures which have led to student debt being the only form of household debt that has increased during the recent recession.

matthew.reisz@tsleducation.com

You've reached your article limit

Register to continue

Registration is free and only takes a moment. Once registered you can read a total of 6 articles each month, plus:

  • Sign up for the editor's highlights
  • Receive World University Rankings news first
  • Get job alerts, shortlist jobs and save job searches
  • Participate in reader discussions and post comments
Register

Have your say

Log in or register to post comments

Featured Jobs

Most Commented

United Nations peace keeper

Understanding the unwritten rules of graduate study is vital if you want to get the most from your PhD supervision, say Kevin O'Gorman and Robert MacIntosh

David Parkins Christmas illustration (22 December 2016)

A Dickensian tale, set in today’s university

Eleanor Shakespeare illustration (5 January 2017)

Fixing problems in the academic job market by reducing the number of PhDs would homogenise the sector, argues Tom Cutterham

Houses of Parliament, Westminster, government

There really is no need for the Higher Education and Research Bill, says Anne Sheppard

British dean of US business school also questions the ‘strange’ trend of increasing regulation while reducing state funding in the UK sector