Friday, September 4, 2009

Students Increasingly Turn to Loans

The latest numbers from the federal department of education show a huge spike in the number of students borrowing money for college - as well as a sharp increase in the amount of money they are borrowing.

Unfortunately, there isn't much of a surprise here, because tuition costs and on-campus living expenses have been rising much quicker than wages or even other costs. Many schools are saddled with their own excessive debts and have little choice but to constantly raise tuition to pay for projects begun many years ago at the peaks of the credit boom.

An interesting note from the government was that it appears as though more students are choosing the direct loans from the federal source. The interest rates on these loans tend to be a bit lower than comparable private student loan deals, so the rise in the actual amount of debt being paid back may be lower than the rise in principle borrowed. In a way, that means more money going to education per dollar spent on student loan servicing - and that's at least a small win for financial efficiency.