Report Says Congress Must Act to Minimize Students' Mounting Loan Debt By STEPHEN BURD
Washington
Students are going deeper and deeper into debt each year to pay for college, and most of them do not realize how much they will owe after they graduate, according to a report released on Tuesday by the State Public Interest Research Groups' Higher Education Project.
The report, "Big Loans Bigger Problems," calls on Congress to increase spending on Pell Grants, make loans more affordable for students by eliminating the fees that students pay to obtain the loans, and maintain flexible repayment options that help students avoid defaulting on their loans.
The report also cautions lawmakers to be "wary" of proposals made by leaders of private colleges and high-cost public universities that call on lawmakers to increase the size of loans that students are allowed to borrow. "We are concerned with efforts to increase loan limits without reducing the total cost of borrowing for students," the report states. Currently, students in college for five years can take up to $22,625 in federal loans.
College leaders argue that maintaining the current loan limits hurts students. The yearly loan limits have not kept up with college costs, they say, and therefore students have had to turn to more-expensive private-label loans to help pay their college expenses.
The State PIRG's report, based on a survey the group conducted of 1,012 students from 55 colleges, says that nearly 8 out of 10 students questioned underestimated the total cost of their loans, by an average of $4,846. To determine how much students' loans would ultimately cost, the group used an index provided by the Education Department that is based on a standard 10-year repayment plan.
Many of the students were off base in their estimates because they did not understand the impact that interest would have on the total costs of their loans, the report states.
"Students frequently experience 'sticker shock' at graduation when they find out their debt is much larger than they planned or expected," the report says. "If they do not understand loan costs, they may borrow more than they can afford and experience difficulty repaying their loans."
This is particularly troubling, the report says, because students are taking on more and more debt each year. Over the last decade, the amount of money that the federal government spends on student loans has grown from $15-billion in 1992-93 to $35-billion in 1999-2000.
Democratic Congressional leaders praised the report. At a news conference on Tuesday, Rep. George Miller of California, the top Democrat on the House of Representatives committee that oversees higher education, said that the group's findings were "very, very important for public policymakers."
"A college education is still one of the best investments of a lifetime, but students saddled with large debts begin well behind the starting line," Mr. Miller said. "They may think twice about public service careers or postpone buying their first home."
Mr. Miller said he supported most of the report's recommendations. He has introduced legislation, H.R. 1162, that would increase the maximum Pell Grant to $7,000 from $3,750 over three years. He also supports efforts to eliminate the fees that the government requires students to pay to get their loans.
And while he has not yet taken a stand on proposals to increase the loan limits, he said at the news conference that he had some concerns with those proposals. "We ought to think through all of the ramifications of that," he said. "We'll have to seriously think about the impact of this debt, especially for young people from low-income families."