Student loan debt is a growing problem. In recent months, it's been a focus of the Occupy Wall Street movement and even received attention in the President's recent State of the Union address.
But student loan debt isn't just a problem facing twenty-somethings coming out of college—it's an issue for middle-aged Americans and for the parents of young students.
Peter Kerwin from Rhode Island Higher Education Assistance Authority the joined The Rhode Show to talk about it.
When we think about the student debt crisis, we think of those twenty-somethings just getting out of college. But it goes well beyond that doesn't it?
It really does. Obviously, the focus has been on young college graduates coming out of school with historically high levels of student debt and facing a terrible job market.
But within the last few weeks, we've seen a couple of different reports come out which show that older, non-traditional students represent the fastest growing segment of student debt holders and that parents are borrowing too much to finance their college for their kids.
Let's talk about the older students first. The same sluggish economy and poor job market which is facing young college graduates when they get out is forcing older, non-traditional students to go back to school.
When the economy goes south, people look to improve their skills in the hope of opening up new career opportunities for themselves.
Reuters and Campus Progress recently reported on an analysis of credit data from 3 million people conducted by a site called Credit Karma. They found student debt is growing fastest for those between the ages of 35 and 49, jumping 47% over the last three years.
It's a very alarming trend. While there's nothing wrong with people going back to school, some of this is being fueled by advertising from the for-profit institutions, which don't always have a good track record of delivering on their promises of providing education that will lead to a better job.
The problem is that this group of students have a shorter time horizon for paying back their student loan debt. You take on enough debt and you'll be paying it off during the time you should be building retirement earnings.
What about the challenges facing that other group, parents of students?
Bloomberg News did a story last week on new data from Mark Kantrowitz, who publishes the FinAid.org website. He estimates that federal education loans to parents are now at $100 billion, which makes up 10% of the total education loan universe.
Loans to parents have jumped 75% since the 2005-2006 academic year.
Parents used to take out second mortgages, but with the housing crisis, folks don't have that kind of equity in their homes, so it's forcing them to eat into their retirement.
It's a hard thing to do, but parents need to be realistic about what's best for their students and what is best for themselves.
Going to your dream school isn't worth it if it means the student and their parents taking on debt to do it.
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