Student Debt: A Trillion Reasons To Scold Colleges

For the first time in history, Americans owe more in college debt than credit card debt. Student debt has reached a staggering $1.3 trillion. Since 2003, student borrowing has skyrocketed nearly 457 percent, spurred by the lowering of credit criteria and an infusion of federal taxpayer funds.

In 2009, the Democratic controlled Congress passed sweeping legislation to overhaul the student loan program, redirecting tens of billions of dollars to college aid.  The Student Aid and Fiscal Responsibility Act also essentially removed private lenders from the college loan equation.

With lax lending standards and more taxpayer money available, the government created a gold rush for student loans.  The total debt ballooned to more than $1.34 trillion in the first quarter of this year, confirm statistics from the New York Federal Reserve Bank's Center for Microeconomic Data.

Today 44.2 million Americans owe money for college loans.  The average student debt for the class of 2016 was $37,172, a six percent increase from the previous year. In the first quarter of this year, student loan debt jumped another 2.6 percent.

Averages often are deceiving. The Fed statistics show that the combined undergraduate and graduate debt incurred by a student with a law degree is $140,616.  Medical and health science graduates accumulate an average of $161,772 in debt.

In the most recent year for which data is available, about 71 percent of students graduating from a four-year college were saddled with debt. Students attending private colleges were more likely to be forced to borrow.  About 75 percent of private college grads had outstanding loans.    

About 40 percent of the student loan debt was used to finance graduate and professional degrees, the Fed figures show.  That's why there are more 1.68 million borrowers on repayment plans that stretch out more than 10 years.

The mountain of college debt is straining graduates ability to meet the loan requirements.  In the third quarter of last year, 16 percent of student loans were in default, which means a failure to make payments for a period of nine months.

But even that statistic does not tell the whole story.  Another 20 percent of student loans were in deferment or were in a grace period or had been forgiven.  Those figures were compiled by the College Board in a study last year entitled, "Trends in Student Aid."

There is no light at the end of the tunnel for future college students. Each year college tuition costs at both private and public schools increase while the ability of students and families to pay for a degree decreases.  This dynamic is creating a growing burden for many Americans.

The blame needs to be placed squarely on the shoulders of American higher education.  Since 1978, Bloomberg estimates that the cost of college tuition has rocketed 1,120 percent.  By comparison, medical costs climbed 601 percent and food leapfrogged 244 percent during the same period.

Under the current system, there is no incentive for private or public colleges to hold the line on tuition costs.  When the price of tuition rises, the colleges are protected from student sticker shock because the government makes it easy for anyone to mortgage their future to pay for a degree.

It is a perverse system that perpetuates this uneconomic dynamic. The American taxpayer underwrites increases in education costs through federally funded loans as well as state and federal taxes.  College tuition increases are passed on to all taxpayers who unwittingly foot the bill.

How does the country change this cycle of tuition hikes?  It will not stop until students and their families decide to opt out of the college arms race where higher tuition equates to a more prestigious degree.  Only when colleges compete on price like other businesses will the insanity abate.

Unless that happens, college debt will rise exponentially. Instead of demanding college accountability for rising tuition rates, politicians have decided to campaign on forgiving all student debt or promoting legislation to make college "free," tacking on another federal entitlement program.

Neither political solution will lead to lower education costs at colleges. Whatever the political outcome, taxpayers will still be on the hook for more than a trillion dollars worth of spending excess by out-of-control college administrators.