It’s no secret that student loan debt has been on a steady incline over the years, but a recent government report revealed that the debt load may have topped $1 trillion last year. The rapidly-increasing burden of college tuition has resulted in many students backing away from college, an action schools are attempting to counter by lowering tuition costs and adjusting the length of time required to graduate.
Out of Control Student Loan Debt
A report released on Wednesday by the Consumer Financial Protection Bureau (CFPB) estimated that student loan debt may have surpassed $1 trillion late last year.
The estimate from the federal agency — so far, just a preliminary finding from a full report it plans to release this summer — is roughly 16 percent higher than one provided earlier this year by the Federal Reserve Bank of New York.
What makes the CFPB’s findings unique is that the bureau surveyed private lenders to gather its data, rather than relying on a sampling of consumer credit reports. By using a different approach, the government found that higher interest costs and an inability to keep up with them are the main reasons more borrowers are falling into student loan debt.
In fact, one in four student borrowers who have begun repaying their education debts are behind on payments. Experts say, this increase in delinquencies is not only feeding a student loan debt bubble that’s ready to burst, but is causing many students to rethink attending college at all.
Schools Reduce College Tuition to Bring Students Back
Just as quickly as student loan debt has risen over the past few years, so has college tuition. According to the CFPB, this is occurring largely because colleges say they need to offset big cuts in state funding. The rise in tuition costs means an increased need for financial aid, which students have avoided by simply dropping out of high-cost schools.
Now those colleges and universities are attempting to lure students back with a couple of incentives.
One incentive being offering is reduced college tuition. For instance, the University of Charleston in West Virginia cut its tuition by 22 percent to $19,500 after seeing enrollment decline for the first time in a decade.
Other schools like Seton Hall University in New Jersey, Lincoln College in Illinois and Pennsylvania’s Cabrini College have all reduced their tuition costs by at least 10 percent for the upcoming academic year.
Another incentive some four-year colleges have offered to entice students back is a reduction in the time it takes to graduate. For instance, Ashland University in Ohio is offering a bachelor’s degree that can be completed in three years instead of four, saving students an estimated $34,000.
These unique approaches to increasing enrollment may benefit students if they are able to acquire enough non-repayment aid to offset remaining costs. For many borrowers already saddled with mounting student loan debt, however, the problem may be too big to solve.