Although politicians don't seem to agree on many things, all parties believe that educating young people is critical if America is going to regain its financial footing. Unfortunately, many students are finding that a higher education, and the student loans required to pay for it, has been priced out of their reach.

Young people will always face an uphill struggle as they work to achieve their career goals. With the current economic turmoil, the struggle has intensified to unprecedented levels. Credit is tightening, and tuition costs are inflating, leaving students unable to keep pace with the rising cost of education.

Rising price of college


Across the nation, the cost of education has mushroomed out of control. In New Jersey, for example, college costs have nearly doubled in eight years, far outpacing any gains in consumers' income. College tuition today can eat up nearly 24 percent of a family's income.

To compensate for the sharp rise in costs, more families are relying on student loans. New Jersey reported that the number of people using loans to pay for a public university has increased from 26 percent in 1992 to 47 percent in 2004, according to a National Post-Secondary Student Aid Study. Student debt has nearly doubled as a result.

In the past, it was worth taking out greater amounts of debt in college, because higher incomes accompanied a college education. The argument is beginning to weaken as the debt burden for college graduates grows larger.

Consolidation caught in the crunch


In the past, students who ran into a problem with their debt could always consolidate their student loans. The credit crunch has denied that option to many lenders. To add insult to injury, Congress last year reduced the amount of subsidies on federal loans provided to them.

Consolidation options may be reduced, but they're not entirely gone. The federal government still consolidates federal student loans through its U.S. Department of Education's Federal Direct Loan Program. Unfortunately, any private loans won't be considered in the deal.

Other sources of help


If you simply can't make your payments, you can apply for an economic hardship deferment or forbearance to reduce your monthly payments. To determine if you qualify, check out the hardship calculator at www.finaid.org.

The Direct Loan program mentioned above may also readjust your repayment plan based on your income and your debt load. Be sure to determine if the program can help you before your loan is in default, however. The Department of Education will also allow you to rehabilitate yourself by setting up a loan repayment program. Call 1-800-621-3115 for assistance.

The cost of colleges and universities has increased to unprecedented levels. While default rates on student loans don't parallel those on the subprime market, they're rising. It's an indication that yet another financial crisis could potentially batter our economy, one that could severely impair higher education, one of the pillars of this country's economic success.

Published on July 12, 2006