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Rising Student Loans a Concern, but Proposed Legislation May Ease Debt for Some

A recent Pew Research article shows that student loans are increasing. Many households in the United States, where the head of the household is under age 35, owe money on student debt. The 2010 figure, the last cited figure in the study, is double that of 1989.

College debt may also be a barrier to entry and completion for some students, but Congress introduced legislation that seeks to reduce the interest rate on loans. It is hoped that such reduction will improve college admission and completion rates, which in turn improves a student’s employment chances over time.

Student loans have doubled since 1989, while the costs of college have increased nearly sixfold in approximately the same time frame. A Rutger’s University report indicates that student loan debt exceeded $1 trillion in 2010. This is more than Americans owed on credit card debt. Graduating with such debt influences where students seek jobs, and which jobs they accept upon graduation.

Congress is taking steps to reduce the burden of student loans by lowering the interest rate on government-issued loans. The hope is that such a reduction will improve college admission and completion rates, especially for low-income students.

The Rutgers study indicates that 56 percent of students borrowed money from various sources, including government loans. The proposed Smart Solutions for Students Act would tie the interest rate of government-issued student loans to the interest rate of the 10-year Treasury bond. This would, over time, lower the student loan debt for students taking out government-sponsored loans.

A college degree pays off in a graduate’s earning potential later on, making debt a reasonable choice for many students. The College Board, in its Education Pays 2010 publication, indicates that the expected salary for college graduates compared to that of high school graduates has widened over time. College graduates also experience lower unemployment rates and earn higher lifetime wages than a high school graduate.

Georgetown University’s Center for Education and the Workforce reports that the best-paying jobs are those in computer science, engineering, nursing and related disciplines. Students accepting loans to pay for such degrees may have an easier time repaying their loan debt.

Students interested in business and science degrees have the best chance of earning a good salary after graduation, and thus repaying their students loans promptly. On the other hand, students majoring in the arts, education and other lower-paying careers often struggle to find well-paying jobs. By making interest rates lower, students can make education and career choices based on their aptitudes and interests rather than on economic parameters.