Worried about the growing sea of debt you’re building to pay for that college degree? Those two cement blocks being strapped to your ankles aren’t going to make the swim to shore any easier. Thanks to a combination of rising tuition costs and increasing loan rates, graduates will have a tougher time staying afloat once they jump into the real world.
Nationwide, the cost of attending a public university has jumped 28 percent over the past five years. But the news gets even worse, because thanks to recent cuts in federal financial aid, students and parents can count on paying higher interest rates on the loans they take out to cover the costs of attending college.
Effective July 1, 2006 rates on Stafford loans have increased from 4.7 to 6.8 percent. While PLUS loan rates have increased from 6.1 to 8.5 percent. Those may seem like small increases, but over the life of the loan those percentage points can add up to thousands of dollars.
Those increases are compounded by the fact that students are taking on more debt to cover the increasing costs of higher education. According to the Project on Student Debt, the average debt of college students has jumped 50 percent over the past 10 years. The typical college student gets a $19,000 IOU slip along with a diploma on graduation day.
That burden is preventing many graduates from enjoying the fruits of their labor. According to a poll conducted by Alliance Bernstein Investments, graduates are being forced to put their lives on hold as they struggle to keep up with larger loan repayments.
Forty-four percent of those polled have put off buying a home and 32 percent were forced to move in with mom and dad. Over a quarter of the respondents indicated that they have delayed having children or put off a medical procedure.
The cuts in student financial aid came about after the Republican-controlled Congress passed the Deficit Reduction Act in 2005. The bill, which also features cuts to Medicare, Medicaid and agricultural programs, contains a $12 billion cut to the Federal Financial Aid program. That money originally went to lenders as a subsidy, allowing them to keep the interest rates on student loans low.
So have the spending cuts of the Deficit Reduction Act helped to reduce our nation’s deficit? America’s current debt stands at $8,508,559,917,618.38 and has been increasing at a rate of $1.7 billion per day since last October. In the last two years alone, the Bush administration has added $650 billion to the national debt.
One would think with all the funding cuts to education and health care (not to mention the levees in New Orleans) that we might have made a dent in the deficit. So where did all that money go if it didn’t go to reducing the deficit? Could those tax and spend Republicans have found a better way to spend the tax payer dollar? Maybe the money went to support our democratic effort to appropriate the resources of another country (Cost of war in Iraq: $308.9 billion). Or perhaps that tax cut for Paris Hilton was deemed more important than the New Deal program designed to help poorer students get through college, at least, that’s what the folks in charge of the White House and both bodies of Congress must be thinking.

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