One of the realities of our higher education system is that student loans are increasingly a part of the landscape. According to the Wall Street Journal, two-thirds of students graduate with student loan debt. And according to, student loan debt has surpassed credit card debt in the United States. Student loan debt is so common now that we pretty much assume that we “need” it in order to get a higher education. But what has been causing the rise of student loan debt and what can you do about it?

graduation thinker

What’s Causing the Rise in Student Loan Debt?

One of the main causes of rising student loan debt is education inflation. For the most part, there are three different aspects of education inflation:

  1. The ease of obtaining student loans has made it possible to support rising education costs. Student loans make it possible for university to be more “affordable” at higher tuition rates. As a result, colleges can raise their tuition rates without worrying about pricing out most students; most students can just get student loans.
  2. Degree inflation is another issue. We have moved to a point in our society where we assume that everyone should have a college education. A bachelor degree is expected now — in many cases where 10 or 15 years ago a high school diploma would have been sufficient. This expectation that most people should attend college has resulted in more people being pushed into, and providing a basis for rising tuition rates.
  3. Finally, the assumption of higher earnings is possibly contributing to the increase in tuition — and the increased student loans. Because we have been told that those with higher degrees earn more in a lifetime, it is assumed that graduates will earn enough to pay back student loans.

Recent economic conditions have probably also contributed to higher collective student debt, since more people have gone back to school in response to job scarcity. Additionally, economic conditions have contributed to a reduction in available scholarships, likely leading some students to take out student loans, since they are unable to cover the cost with scholarships.

What Can You Do About It?

Chances are that you will need to come up with some way to save up for college, as well as avoid being one of the 14% of students that default within three years of making the first student loan payment. Some things you can do to avoid being overwhelmed with student debt include:

  1. Be realistic: It is important to be realistic about your earning ability with certain majors. Consider what you can realistically expect to earn, and how feasible it will be to make student loan payments with your likely starting salary. In some cases, borrowing a great deal to follow your dream may not be the best financial choice.
  2. Consider a “modest” education: Was I accepted into the Ivy League? Yes. I even got scholarships to a couple of private schools. However, even with a scholarship at a good private school, what you pay can be quite steep. Getting a full ride to such schools can be difficult. Instead, I opted to do my undergrad at a state school that covered my entire tuition. In the long run, there are only a few instances when where you went to school truly matters.
  3. Borrow as little as you can: Combine college savings, jobs, and scholarships to help you avoid borrowing. Then, borrow only what you have to. By reducing what you borrow, you can stay avoid getting in over your head.

It is possible to get in over your head with student loans, as we’re seeing as student loan debt continues to rise. As you prepare for a higher education, make sure you are smart about your loans so that you can effectively deal with student loan debt after graduation.

Photo via Wikimedia Commons