Crushing student debt putting squeeze on graduates and the economy

The growth of student loan debt in the United States continues at an alarming rate, with estimates now putting the total at more than $1.3 trillion.

We spoke with college students here in the valley about how the soaring cost of higher education is impacting their wallets and their futures.

“First off, I get nervous right away, because when I think of a loan, it is not my money and so i’m going to have to pay it back eventually,” said

21-year-old College of the Desert student Christian McGrath. He is now among the thousands of college students nationwide who are thinking long and hard about their approach to financing higher education.

Watching graduates ahead of them, burdened with crushing debt levels and facing a less than than optimum job market, many students today are being more cautious than ever.

“You hear so many stories about students taking out all these loans to get a good education, and then they graduate and they are one hundred thousand dollars in debt, and they can’t get a job and they’re trying to pay off debt with no money,” said McGrath.

The conversation about student debt includes staggering numbers.

40 million Americans now have at least one outstanding student loan.

That total is up from 29 million in 2008.

The average debt load for last year’s graduates is $30 thousand.

Student loans are now the second largest personal debt category in the United States, greater than credit card debt and car loans.

Deanna Murrell, the head of financial aid at College of the Desert is all too familiar with the troubling stats.

“When you see the economy kind of go down you do see borrowing go up, so it is natural that does happen but the numbers are still astonishing,” said Murrell.

For students who do graduate with thousands of dollars in loans to pay off, economists say it causes a number of problems.

It hurts the economy because their discretionary spending is limited, and it takes longer for the graduates to start their own households.

“I’m going to be in debt for awhile and its been like this. It is an ongoing thing and I feel like it keeps getting worse,” said COD student Bryanna Czarny.

Calls for solutions to the student debt bubble are growing louder, with elected officials in Washington pushing various plans and ideas.

While speaking at Georgia Tech in March, President Obama announced the “Student Aid Bill of Rights”, directing the Department of Education to implement new policies aimed at providing relief for graduates having difficulty paying off their loans.

A controversial call for canceling all student debt is also gaining support, with democratic Senator Elizabeth Warren among those leading that effort.

“The average student loan balance among 25 year olds who borrow has grown by 91 percent in just ten years,” said Warren while speaking in Washington in 2014.

At College of the Desert, the financial aid staff is working to make sure students who advance to four year schools are fully aware of the opportunities and potential pitfalls associated with loans.

Students are now encouraged to carefully borrow only what they truly need.

“We do encourage students to make a budget to see what they do need and then assess their needs from there,” said Murrell.

“My strategy is to apply for some scholarships to see if I can get some money out of that,” said McGrath.

Back in 2010, President Obama put the U.S. Department of Education in control of approving all student loans, and in charge of collections.

That means American taxpayers now cover the losses when students default on their loans.

The current default rate is running at around 25 percent, based on numbers released by the Federal Reserve Bank of St. Louis.