How and why America reached $1.2T in student loan debt
For millions of Americans, getting a college degree is part of their dreams. But it can easily become a financial nightmare.
Student loan debt in America is at a record $1.2 trillion - an 84 percent jump since the 2008 recession.
So how and why did Americans accumulate so much student debt?
Stories like Nicole Kattner's have become the new normal.
"I'm probably at like $74,000 for six years of school," said Kattner, a UWGB graduate. "Yeah, and it's a lot."
The 28-year-old Kiel native now lives in De Pere as a social worker. She has undergraduate and graduate degrees from UW-Green Bay.
She's one of 40 million Americans who have at least one outstanding student loan, an increase of 11 million since 2008. According to the College Board, an average graduate leaves school with about $27,300 of student debt.
"You know, the college debt," Kattner told FOX 11 during a recent interview. "It's just that dark cloud that's over you all the time. You sit there and think, 'How am I going to buy a car? Can I afford my apartment on my own? Do I need to have roommates? When am I going to be able to buy a house?"
Financial planner Dean Listle hears these concerns every day.
"Student loans are just, they're mounting to the point where people have to change their lifestyle going into retirement. I do think that this is potentially a train wreck that needs to be corrected over the next handful of years," said Listle, an investment advisory representative at Secure Retirement Solutions in Ashwaubenon.
One reason for all of the debt is more Americans are going to college. The U.S. Department of Education's most recent national numbers from fall 2013 show total undergraduate enrollment was 17.5 million students, an increase of 46 percent from 1990.
Kevin Quinn, an economics professor at St. Norbert College, says the higher incomes people receive with an education motivate people to go to college.
"The main driving force is that the difference in your life if you have a college degree versus not having a college degree is immense," said Quinn.
He noted that tuition has been rising at roughly double the rate of inflation.
According to national facts from the College Board, the average in-state tuition cost across the U.S. for public four-year universities is 42% higher than it was 10 years ago and more than twice as high as it was 20 years ago. For private non-profit four-year schools, the increases were 24% over 10 years and 66% over 20 years. For public two-year schools, the jump was 28% over 10 years and 59% over 20 years.
"It takes more and more and more to run a college than it used to," Quinn explained. "We need more people. Those people are more expensive. People that have advanced degrees in a lot of different fields have other options outside of higher ed."
Students often make their decisions based on college amenities, so universities also spend more to build attractive facilities.
Here are some more facts to consider from the U.S. Department of Education: While students at for-profit colleges represent only about 13 percent of the total higher education population, they make up about 31 percent of all student loans and nearly half of all loan defaults. Meanwhile, interest rates on federal student loans right now range from about 4.3 percent to nearly 7 percent - higher than many rates on car loans and mortgages.
The increase in debt comes as income levels for highly educated workers have been flat.
Considering all of this, some former students now admit they ignored the reality of their financial aid plans.
"I put the price of education, what I would gain out of it and the piece of paper that I could put on my resume and the networks that I would make, is that was invaluable to me, so I didn't care how much I was investing in it," said Kattner.
Now she expects to deal with her debt dilemma for years to come.
FOX 11's coverage on this issue continues all week long. We'll explain how student debt is not just confined to younger Americans; how it is impacting our economy; and take a closer look at alternatives to four-year schools.