The thought of graduating college in four years with exorbitant debt was enough to make Adam Stevens temporarily shelve his collegiate plans.
It would cost the 19-year-old North Augusta resident more than $40,000 to pursue a bachelor’s degree at the University of South Carolina, where he attended his first semester in the fall.
“That’s assuming that I stayed on track with what I was doing and only went here for four years,” he said.
Stevens’ fears are well-founded.
National student-loan debt surpassed the $1 trillion mark, rising by $33 billion in the third quarter of 2013, according to a November report released by the Federal Reserve Bank of New York. Delinquency rates for student loans also increased by a percentage point to 11.8 percent, when compared to the previous quarter.
Student-loan debt now follows only home mortgages in household debt, ahead of auto loan and credit card balances.
With colleges around the country hiking tuition prices and a shaky job market for new graduates, Stevens chose to leave school and instead move back home with his parents in hopes of finding a temporary job.
His original plan was to pursue a degree in graphic design, but he knew that he might change his mind and attend school for longer than four years. He also knew there was no job guarantee after graduation, which could cause trouble making loan payments.
Although his parents were willing to help finance college, Stevens said the cost he would rack up in debt still seemed insurmountable.
“I knew that they could only pay for so much, and at a certain point when I was done, I’d have all this money sitting on my shoulders,” he said. “I wanted to step back and see if I could go about it in a smarter way and maybe find a cheaper option, because it was just so daunting.”
IN SOUTH CAROLINA, about 55 percent of college students graduating with a bachelor’s degree in 2012 accrued an average of $27,416 in student-loan debt, according to a recent report compiled by the Institute for College Access & Success. The report also found that, in Georgia, nearly 60 percent of graduates faced an average $23,089 of debt.
To calculate state-by-state averages, the institute used data provided voluntarily by more than half of all public and private nonprofit, four-year colleges.
The institute’s Project on Student Debt showed that 71 percent of 2012 graduates had accumulated student-loan debt to the tune of $29,400, on average. From 2008 to 2012, the institute found that average debt including federal and private loans increased each year by six percent.
“Despite discouraging headlines, a college degree remains the best route to finding a job in this tight market, but students and families need to know that debt levels can vary widely from college to college,” the institute’s president, Lauren Asher, said in a statement. “If you need to borrow to get through school, federal loans are the safest way to borrow.”
Georgia State University economist Rajeev Dhawan said students graduating with high loan debt often dial back on certain purchases, causing a trickle-down effect to other areas of the economy, such as discretionary spending on home furnishings and electronics in addition to the housing market.
“That is the channel that will play out over the years,” said Dhawan, a professor and the director of the economic forecasting center at Georgia State University’s J. Mack Robinson College of Business. “It doesn’t happen in a quarter or two quarters. This is a long-term thing. You’re already beginning to see that in little bits of the data.”
Dhawan also said the current economic state is partly responsible. In past years, parents could more easily take a home equity loan to help fund their child’s education, but lowered home values in the wake of the housing bubble has made that more difficult, he said.
“People want to get educated, because they believe that education pays off … it’s OK to take a debt to get the education,” he said. “But, the issue is how much? That is where people end up sometimes making a mistake to take on too much debt.”