Student loan debt surpassed credit card debt in the United States for the first time ever this year and is expected to hit $1 trillion by the end of 2011. As a result of the recession, many students face a dismal post-graduation jobs market, causing concern that the investment in a college education may not bring as strong a benefit as it has in the past.
Many schools have been forced to raise tuition or, as in MU’s case, course fees to fill gaps in funding, and, as a result, more young people today attend college at a higher cost than ever before.
The new federal budget seeks to reduce Pell Grant funding to the lowest level it has been since 1998. The grant will be reduced by more than $2,500 per award for the 2012-13 school year, resulting in almost 1.4 million students losing eligibility for the grants.
Office of Student Financial Aid Director Jim Brooks said more than 57 percent of MU undergraduate students have student loans and many students receive Pell Grants.
“During the 2010-2011 academic year, there are just over 5,600 students receiving Federal Pell Grants,” he said.
Brooks said the average student debt at MU is below the national average.
“The average MU undergraduate student loan debt upon graduation is $20,689,” he said. “Nationally, it is around $24,000.”
Student loans are one of the few loans that cannot be claimed under bankruptcy if the holder cannot pay them. If a student does not repay a government funded student loan, the government can take money out of the indebted person’s salary until the loan is repaid.
Terry Wilson, director of Health Promotion and Wellness at the Student Health Center, said many students come in seeking mental health services because of financial stress.
“I think financial strains and demands are one major component of student stress levels,” she said. “When the recession happened at a national level, many students feared they may have to drop out of school.”
Wilson said mental stress could come from a variety of sources, and it shouldn’t be blamed on financial difficulties alone.
“Stress has many different components, so it’s hard to attribute it to one specific thing,” she said. “It’s really complicated. I can’t say they’ve come in specifically for financial reason, but I do know there are a lot of students who seek our services for anxiety and depression.”
Economics professor George Chikhladze said he believes despite economic hardship and emotional stress, the investment in a college education is worth the return.
“Tuition is a long term investment,” he said. “You have to borrow money now if you cannot afford to pay for college, and you hope that once you graduate you will get a good job and be able to pay for those loans.”
Chikhladze said because of the recession, it is more difficult to obtain a job after graduation that will provide sufficient funds to repay student loans. He said this makes people worry that investing in college may not be worth the debt that follows.
“You have to do a rigorous analysis here to know what’s really going on because a college education does have huge benefits,” Chikhladze said. “The gap between the earnings of someone who has a college education and someone who only has a high school education has been widening in the last 40 years or so. That’s proof in itself that college education does pay off.”
He said the panic surrounding debt and unemployment is a normal result of the recession.
“Every time there’s a recession, jobs are hard to find, so it always raises the question if you can’t find a job after you went to college then why did you take out the loans?” Chikhladze said. “I think the problem is just a temporary result of the recession we’re in now. Of course, we are not going to be in the recession forever, and we’re actually coming out of the recession now.”