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Nick Tomecek / Northwest Florida Daily / AP

Crushing student debt makes ends hard to meet

With student debt at an all-time high, only a minority of graduates are succeeding in paying down their balance

“You have a generation of working class citizens that can’t afford to go to school,” said Elizabeth Bonta, a 27-year-old high school counselor. “And yet that’s the only option you have to survive.”

Elizabeth, the first in her family to graduate from college and acquire a Master’s degree, struggles to get by with crushing student loans of more than $30,000 while also paying off her credit cards.

She is not alone — in fact, her school debt is close to the national average for college graduates. Student debts after graduation hit an average of $35,051 this year, according to figures given to Al Jazeera by student financial planning group Edvisors.

Total student loan debt

In 2010, student loan debt surpassed credit card debt, and by the end of 2014, student debt had reached an all-time high of $1.16 trillion.

Nearly 71 percent of students graduating in 2012 from a four-year college had student loan debt, and the average student debt has increased by over 70 percent from 2004 to 2012.

Many individuals are struggling to pay it all back. Only 39 percent of student loan borrowers are currently paying down their balance. The remaining 61 percent are either in delinquency, deferment or forbearance.

To pay for her undergraduate degree, Bonta and her family relied on a patchwork of financing. Bonta worked full time, enrolled in a tuition reimbursement program through her employer, put her school costs on her credit cards and even had her parents take out a home equity loan.

She financed her two years of graduate school at Johns Hopkins with $34,000 in loans and by going deeper into credit card debt.

Although Bonta is consistently ekeing out her student loan payments, others aren't so lucky.

“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student loan balances and delinquencies is concerning,” said Donghoon Lee, research officer at the Federal Reserve Bank of New York, in a prepared statement. “Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”

According to Mark Kantrowitz, senior vice president of Edvisors, the problem with paying off student loans is self evident: Every dollar spent on student loan payments is a dollar less that is available for other priorities.

“Students who graduate with excessive debt tend to delay major life-cycle events, such as buying a car, getting married, buying a house, having children and saving for retirement,” said Kantrowitz. “But there is no evidence that this ‘problem’ has gotten worse.”

Delinquency on student loans — specifically, defaulting — can have very negative ramifications for the borrower, Kantrowitz told Al Jazeera. Not only can up to 20 percent of every payment be deducted for collection charges, but can also result in negative reports in the borrower’s credit history.

“The federal government has very strong powers to compel repayment,” said Kantrowitz, “including garnishment of up to 15 percent of wages, offset of up to 15 percent of Social Security benefit payments and intercept federal and state income tax refunds.”

Plus, student debt is nearly impossible to have discharged through bankruptcy.

In 2012, the median annual salary of a bachelor’s degree graduate was $46,900 while the average student loan balance for people under 30 was $21,400, indicating that repaying student debts for many, if not most, was possible.

But while student loan debt continues to soar, median salaries have dropped. If these trends continue, increasingly fresh graduates won't be able to repay their loans.

Growth in average student loan debt at graduation

Source: Edvisors

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