Student debt affects more than imagined

Alonso Montano/Staff Writer

Students across the nation have been taking on large amounts of debt due to the increasing cost of higher education. The $1 trillion debt is not only affecting students and graduates, but is also starting to have a harmful impact on the national economy.

Cem Karayalcin, economics department chair, acknowledged that the student debt rate has gone up rapidly in the past few years. According to statistics from the Financial Aid Office, 39 thousand students receive some type of financial aid to attend FIU.

“Economists are worried now because the debt has grown rather rapidly, whereas other debts have gone down,” Karayalcin said. “Student debt is going up so that is a cause for concern.”

Figures released by the Federal Reserve of New York show that aggregate student loans nationwide have continued to rise. At the end of 2003, students and graduates owed just $253 billion in aggregate debt in the United States; by the end of 2013, the debt had ballooned to a total of $1.08 trillion — an increase of over 300 percent.

According to the same report, aggregate student debt grew 10 percent in the last year. By comparison, overall debt grew just 43 percent in the last decade and 1.6 percent over the past year.

According to a December study by the Institute for College Access & Success, seven out of 10 students in the class of 2012 graduated with student loans with an average debt of $29,400.

Karayalcin explained how the large amount of student debt is affecting the national economy.

“The U.S. economy runs on consumer spending and if students are trying to pay back that is reducing consumption and that is not good for the national economy,” Karayalcin said. “Basically, economists think that debt would take away from their ability to purchase a house and cars because students are trying to pay the loans back so they don’t want to spend much money.”

He also mentioned how debt can affect the application process for a mortgage.

“If you have debt and are, for example, applying for a mortgage that’s going to be a negative for you,” he said.

Currently, there are about 20 thousand students at FIU who have taken out a loan of some kind to help pay for school; and Director of Financial Aid Francisco Valines said the University focuses on educating students about loans to avoid major financial troubles in their future.

“Every freshman and almost every transfer student takes the freshman experience class and there’s a module on financial aid and handling your finances in that class,” Valines said. “There’s information on student loans and how to handle your student loans in that module.”

“We make sure that we’re educating them as much as we can,” Valines said.

He also reminded students to do some research and only take out what they need.

“By federal regulation we are required to offer you every loan you’re eligible for, but that doesn’t mean you have to take them,” Valines said. “Be smart about what you borrow and only borrow what you need.”

Karayalcin also had some words of advice for students looking to take out loans: don’t borrow too much given your future earning potential.

“Different majors have different earning potentials, if you’re going to be in social work and are not going to make as much money as a doctor then it is best not to borrow as much because that will be a burden on you when you graduate,” he said.

But if it’s a choice between going to college or not going to college, Karayalcin said a student should “always choose going to college and borrowing.”
“Education is an investment for your future. And in some cases if there’s no other way to finance it, you should borrow,” he said.

-news@fiusm.com

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