Student loans is second largest source of debt in US households, says recent study

Steven Sabel, a former firefighter, decided to go to law school after a knee injury prevented him from returning to duty. He had wanted to be a lawyer since he was young.

Sabel, now a second-year student at UCLA, is financing his degree almost entirely on loans. Tuition at the UCLA School of Law costs more than $45,000 a year, and Sabel expects to graduate with around $200,000 in debt.

“From day one of starting law school (I was) already accruing interest,” he said with a sigh. “(The debt) will impact what I do for work. … I have to get the big law firm job just to pay off the loans.”

Sabel is one of many individuals who said student loans will influence their life decisions. A recent report by the Campaign for College Opportunity, a nonprofit advocacy organization in California, estimates that the amount of student loan debt in the U.S. was $1.08 trillion by the end of 2013, exceeding the national aggregate totals of auto loan, credit card and home-equity debt balances.

The report notes that student loans are the second largest source of debt for American households, after home mortgages. Almost a third of people who receive a bachelor’s degree in the U.S. now graduate with loan debt.

The report says that the number of federal student loan borrowers jumped 69 percent in 11 years – from 5 million in the 2002-2003 academic year to 8.45 million in the 2013-2014 academic year. For the 2012-2013 academic year the average amount of student debt was $25,884, up 47 percent from nine years prior.

Kim Tran, policy director of the Sacramento office of the Campaign for College Opportunity, said student debt is rising partly because more people are attending college.

“More students are going to college so the overall entire debt package increases, which is a good thing,” Tran said. “We recognize student loans are good since otherwise some students wouldn’t have an opportunity to go to college.”

UCLA’s students on average fare better in student debt than the state and national average. 48 percent of UCLA undergraduates take out student loans, said Ronald Johnson, the UCLA director of undergraduate financial aid.

At UCLA, the average undergraduate student debt at graduation is $20,229, Johnson added.

The study also found that, nationally, low-income families tend to spend more overall on college education costs, as many attend more expensive for-profit schools. Moreover, because their income is less than their wealthier peers, low-income families tended to pay a higher percentage of their income on college costs.

Low-income students had as much debt as those with a higher income, but were also significantly less likely to graduate, according to the Campaign for College Opportunity’s findings.

Black students took out student loans at the highest rate of any racial and ethnic groups, according to the report.

The New America Foundation, a nonprofit, nonpartisan public policy institute, maintains that much of the $1.08 trillion in student debt is attributable to graduate students.

Johnson said there are many more financial aid options available for undergraduate rather than graduate students. While undergraduates have several grant and loan options, graduate students must primarily rely on competing for fellowships, assistantships and a small amount of federal grant aid, he said.

More than half of undergraduate students at UCLA receive financial aid, which is higher than graduate students, Johnson said.

The Campaign for College Opportunity report also argues that debt impacts students’ ability to fully partake in the economy. The majority of survey respondents said their student debt will make them reconsider whether they want to purchase a car or home, start a business or save for retirement early.

The report says 44 percent of all undergraduates who took out private loans, which usually charge more in interest, did not make the most of their eligibility for federal student loans, possibly because they were unaware of the options available to them.

Johnson said he thinks some UCLA students may have not completed the Free Application for Federal Student Aid because they were unaware of the opportunity. He recommends that all undergraduate students fill out the FAFSA, regardless of socioeconomic status.

Johnson also encouraged student borrowers to explore loan repayment options available to them early in their time at UCLA.

“We want students to make sure that they continue to explore the options that are available to them for repayment and that they don’t wait until their senior year to do so,” Johnson said. “We want to plan ahead as much as possible to make the situation more manageable.”