Education Loans Surpass Credit Card Debt as Top Financial Burden

Are you struggling to pay off student loans? Well, you’re not alone.

Student loan debt has surpassed credit card debt for the first time, as a growing number of Americans take out loans to go to school. According to the New York Times, the amount of student loan debt is well on its way to over one trillion dollars.

Student loans have often been described as good debt by some educators and economists. “When you think about what’s good debt and what’s bad debt, student loans fall into the realm of good debt, like mortgages,” Professor Sandy Dynarski, an education and public policy professor at the University of Michigan, told the Times. “It’s an investment that pays off over the whole life cycle.”

But with education costs rising every year and student aid cuts in the federal and state budgets, graduates are leaving school with drastically more debt than they did just ten years ago. In 2000, total student debt was at 200 billion dollars – just twenty percent of the current amount.

President Barack Obama has attempted to address this issue with income-based payment options that would forgive remaining student loan debt for those people who pay 15 percent of their income over a 25 year span.

Of course, loans aren’t the only option to help pay for school. There are also federal and state grants. The Pell Grant has managed to survive federal budget cuts. Unfortunately the maximum amount for a Pell Grant has been set at $5,550 per year.

The average cost for tuition at a private school for 2010 was $27,293, according to the College Board website. Even a state school costs between $8,000 and $12,000 a semester, and that isn’t including room and board or books and lab fees.

For many college students, loans are a necessity more than an option. With interest rates increasing in 2011 from 4.5% to 6.8% on federal student loans, paying them off is going to take years longer. And since bankruptcy is not an option for student loans, many may never get out of debt.

Paying for college has become a lifetime commitment, and in an economy where decent jobs are lacking and pay is stagnant, a lifetime may not even be long enough to pay off the debt. And with the negative effects that defaulting on a loan has on credit scores, school loans can seem like more of a hindrance than a help.