DiNapoli: Student Loan Default Rates Expected to Increase
Recession Adds New Burden to Rising Cost of Education in New York State
New York faces a serious rise in student loan defaults in the wake of the economic downturn, according to a report released today by New York State Comptroller Thomas P. DiNapoli. The report found that the average cost of a college degree has increased by more than 30 percent over the past five years, more than double the rate of inflation during the same period, forcing more reliance on borrowing to finance education expenses than ever before.
“Young New Yorkers and their families are falling deeper into debt in order to get a good education,” DiNapoli said. “A well-educated work force is critical to our economic recovery, but in this economy, college is becoming a necessity too many New Yorkers can’t afford. Students are graduating deeper and deeper in debt. We need to make affordable higher education a priority in New York.”
College students across the country owe a collective $86 billion in loans, with the average amount reaching just under $22,000 according to the study. Nearly 40 percent of college expenses were paid with loans last year, with students’ families shouldering 16 percent of that debt.
DiNapoli’s report noted the American Recovery and Reinvestment Act’s commitment to increase funding for Pell grants provides an additional $180 million in aid for students in New York. The Legislature has also approved Governor Paterson’s proposal to create the New York State Higher Education Loan Program, which will fund $350 million in loans for students of the state.
The study concluded that:
- Private loans have expanded nationally by more than 600 percent over the last decade;
- As of 2007, nearly two-thirds of college students graduating in New York state were in debt;
- The national student loan default rate rose to nearly 7 percent last year, up from a recent average of 5 percent; and
- Sallie Mae, which controls almost 45 percent of the loan market, reported that its default rate rose to 10.2 percent in the same period.
Click here for a copy of the report.
Click here to listen to the Audio.