To some college students, the thousands in federal loans they spend for school each semester can feel like Monopoly money because it can be years before a bill appears in their mailbox.
But unpaid debt, which for a UTC student averages $29,000 upon graduation, according to school figures, quickly becomes real, and a recent study by the Federal Reserve may indicate that students are assuming more debt than they can later handle.
"It's like starting life with a mortgage," said Pauline Abernathy, vice president of the Institute for College Access and Success, a Washington, D.C., and Oakland, Calif.-based nonprofit organization that tracks student debt. "It affects people's decisions about what career to pursue, whether to buy a home, start a family, whether they can save for retirement or their children's education."
The net increase in seriously delinquent student loan balances was $2.69 billion nationally in 1999 and now, more than a decade later, has reached $15.99 billion, the Federal Reserve says.
For credit cards, the net increase in seriously delinquent balances isn't as steep -- in 1999 it totaled $6.97 billion and in 2011 it was $10.77 billion, according to a New York Federal Reserve report on household debt and credit.
Growth in student lending also rapidly increased while other forms of debt declined, according to the report. Student debt, including federal and private lending, jumped 25 percent, from $440 million in 2008 to $550 million in 2011.
But credit card debt was down 20 percent in the same four-year period, landing at $690 million in 2011.
At UTC, total student loans increased from $25.7 million in 2006 to $36.4 million in 2010, records show.
Students are often programmed to accept loan offers, said Charles Putnam, a senior at the University of Tennessee at Chattanooga who expects to graduate nearly $20,000 in debt. They hear that an education is the best investment you can make and guess they'll get a good job and be successful, he said.
BY THE NUMBERS
"When you get offered these loans, it's not like it's written in big read letters, 'You will pay this back,'" said Putnam. "All you think about is, 'I got to pay rent and don't want to work three or four jobs.' I feel like it's real, but I don't get the reality of it. The money is given to me, and I will not start paying back till six months after I graduate."
Economic troubles are fueling student lending and delinquency. Many people facing layoffs or trimmed hours returned to universities or community colleges to train for a new careers, but some still graduate with few options.
But a lack of education about student loans is also contributing to delinquency, officials said.
Some students don't know that they can request deferment of their loans in certain cases or be placed on income-based repayment plans, which lower required monthly payments to be in line with an individual's earnings. If they have paid on the loan for more than 25 years, it can be forgiven, she said.
Students should educate themselves on repayment options before signing the dotted line on a loan and shop carefully for their school of choice, officials say.
Beginning in October, schools will be required by federal law to publish the net price of attendance, including food, housing and other expenses. Surprisingly, the bottom-line cost at expensive schools can be much lower than schools with low tuition because they have more grant aid available, Abernathy said.
"Looking at tuition alone is very deceptive," she said. "Tuition is like the sticker price on a car and that's not often what people pay."