Tuition Jumps 8.3% Doubling Inflation as Obama Plans Debt Relief

Tuition and fees at U.S. public universities soared 8.3 percent this year, twice the rate of inflation, to an average $8,244, a College Board report found. Nonprofit private college costs rose 4.5 percent to $28,500.

Surging tuition has left the average college graduate with more than $20,000 in loans, according to the College Board. In response, President Barack Obama’s administration said late yesterday that it will use its executive authority to reduce loan payments for millions of students.

Borrowers struggling to repay student loans and unable to find jobs are joining protesters at Occupy Wall Street tent cities around the country. Federal and private college loans -- now approaching $1 trillion -- surpassed credit-card debt in June 2010 for the first time, according to Mark Kantrowitz, publisher of, a college grant and loan website.

“While the importance of a college degree has never been greater, its rapidly rising price is an overwhelming obstacle to many students and families,” College Board President Gaston Caperton said today in a statement.

In-state tuition and fees at four-year public universities rose the most since the 2004-2005 school year. The increase at private colleges was similar to last year’s rate. Only a third of students pay the published price of tuition because of scholarships, the College Board said.

$28,000 in Debt

Public universities, supported by state taxpayers, tend to increase tuition when legislatures cut budgets, as is the case in California, Sandy Baum, co-author of the report, said in an interview. California, which raised in-state tuition and fees 21 percent, the most in the U.S., enrolls 10 percent of full-time, four-year college students, the College Board said.

Students left public universities with an average of about $22,000 in debt, up from $15,000 a decade ago, according to the New York-based College Board. At private colleges, they were saddled with about $28,000, up from $17,000.

The nonprofit College Board, whose members include universities, didn’t have enough data to break out debt levels at those who attended for-profit colleges, Baum said. The median debt level for a bachelor’s degree recipient at a for-profit college is $31,190, Education Trust, a Washington-based nonprofit research and advocacy group, said in a November 2010 report.

‘Difficult Choices’

“To leave school with a lot of debt means that you are going to face even more difficult choices about starting a family, buying a home or whether you could take the risk for starting a business,” said Lauren Asher, president of the Institute for College Access & Success, an advocacy group in Oakland, California.

Borrowers are defaulting on their student loans at the highest level since 1997, according to the U.S. Education Department. The latest rate, which applies only to the first two years students are required to make payments, rose to 8.8 percent in the two years through Sept. 30, 2010. It was 7 percent a year earlier.

Under U.S. law, student loans, unlike credit-card debt or mortgages, can rarely be discharged in bankruptcy. Defaults can subject students to government confiscation of tax refunds and Social Security payments as well as paychecks.

Obama is scheduled to give a speech today at the University of Colorado’s downtown Denver campus, outlining his student-debt plan.

‘Pay as You Earn’

In a press briefing late yesterday, U.S. Education Secretary Arne Duncan and White House domestic policy adviser Melody Barnes said the administration would institute a “Pay-as-You-Earn” plan that could reduce monthly payments for 1.6 million current college students and borrowers.

Starting next year, these new borrowers will be able to limit their monthly student-loan payments to 10 percent of their discretionary incomes, with the balance forgiven after 20 years, Duncan and Barnes said. That program was scheduled to take effect in 2014. Currently, students can cap their payments at 15 percent of discretionary income, with loans forgiven after 25 years. Under the new program, students could reduce their payments hundreds of dollars a month, Barnes said.

Also next year, students and recent college graduates who took out federal loans both directly from the government and through private lenders will be able to consolidate their loans with the Education Department and pay as much as half a percentage point less in interest, the administration said in a statement. About 6 million borrowers will be eligible.

Republican Questions

The moves won’t cost taxpayers because they will no longer pay subsidies to private lenders once students consolidate their loans with the federal government, Barnes said. The Obama administration in 2010 eliminated the role of private lenders in originating student loans.

Barnes and Duncan said they had the authority to enact the changes without congressional approval. In a statement yesterday, U.S. Representative Virginia Foxx, a North Carolina Republican, questioned that claim. In a hearing earlier in the day, she said eliminating the role of private lenders may have hurt student debt counseling and default-prevention services.

Mariana Mendes, 22, unemployed and living with her parents, has $10,000 in student-loan debt after graduating in May from Bates College in Lewiston, Maine, with a degree in art history.

The debt is forcing her to defer her dream of working in a museum because she can’t afford to move out of her parent’s home while she’s paying off her loan, said Mendes, who was interviewed at the Occupy Wall Street protest in New York.

“If I didn’t have debt, I would be somewhere else,” Mendes said.

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