Why and how there has been a rise in community college debt

Recent reports reveal the fact that there is an increase in debt (from 2004-2008) among students who attend public and local community colleges. This fact is quite surprising as these institutions happen to be the lowest cost schools of the country. Relevant data shows that in June 2008, one-third of graduates started their career without owing anything in federal or private educational debt; only 10% of the graduate students owed more than $40,000. A median borrower graduated with only $19,999 student debt, which is an increase in $1026 debt from 2004-2008.

Increase in debt: The statistics

A 2008 federal bureau statistical data shows that about 5% students, who attended associate degrees from public community colleges, owe more than $30,000 in student loan debt. Patricia Steele, a College Board researcher, points out that in 2008, the average tuition fees at a public college was only $2,402. Steele also mentions that the total educational cost for 2 years should not exceed $7000 even if the students require additional $1000 for buying books and supplies. However, there is an 8% increase in debt (from 2004-2008) among public community college finishers.

Reasons for the increase in debt

David Baime, the Vice President of government relations for the ‘American Association of Community Colleges’, states that some factors are responsible for the increase in community college debts. One of the prime factors responsible for the present situation is that scholarships and grants failed to keep up with the inflation during most of the decade. Though community colleges increased their tuition fees about $500 from 2003-2007, yet the federal Pell grant increased by only $260. Moreover, the cost of textbooks also increased and it was very easy to get loans during credit bubble. However, real family incomes decreased considerably during the mentioned time frame. Lauren Asher, the president of the ‘Institute for College Access and Success’, points out that living costs also rose drastically from 2004-2008, which worsened the situation, even more.

It is a common belief that community colleges are affordable. However, students attending full time course in these colleges are finding it really hard to cover their living costs without taking out loans. According to a number of analysts including Asher and Steele, low interest educational debt is acceptable for a student who is close to getting a degree. But, the number of new needy students is increasing in the present times. It will increase the debt even more.

However, credit crunch has wiped out those financial firms, which used to advertise high amount of private educational loans. Therefore, it can be expected that in the forthcoming days, there will be a significant decrease in the number of students taking out expensive loans to fund their education. This in turn, will probably reduce community college debt to a significant extent.