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For graduates, student loans turn into an albatross

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"There are a lot of reasons I'm not in college right now, but the biggest is the cost," says Mr. Pedigo, who hopes to open a recording studio in Granbury, Texas, with friends. "College was just too expensive, and getting more expensive every semester. It just seemed like a lot of stress to make it through school just to be paying off debt until you're 30."

For those who do graduate, the average loan debt was $17,600 in 2004 - $22,581 in the case of private colleges, according to the Center for Economic and Policy Research. Ms. Kamenetz says those averages are too close to the $23,000 maximum that undergraduates may borrow from the federal Stafford loan program over four years.

"If students need to go over that maximum, it means they need to take out private loans with higher interest rates," she says. "That means they'll likely be paying more over a longer period of time, which slows down life even more."

Of the three major variables affecting student debt - tuition costs, the job market, and interest rates - the latter has the gloomiest forecast, says Jacqueline King, director of the American Council on Education's Center for Policy Analysis.

While tuition prices continue to rise, the acceleration slowed this year, Ms. King says, offering a positive projection for future college students. And the job market is relatively healthy, she says, opening up more doors for graduates. But interest rates will increase on July 1, when federal loan programs move from a variable rate system to a higher, fixed rate. Stafford loans will jump from the current 5.3 percent rate after graduation to 6.8 percent. PLUS loans, designed for parents, will rise from 6.1 percent interest to 8.5 percent.

"The class of 2006 will not be affected by this increase, but the entering freshman class will borrow under this new rate," says King. "This could certainly have an effect on future graduates and how much they need to pay back once they are out of college."

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