Is it Possible to Balance Student Loans with the Cost of Running a Car?

The cost of car ownership is on the up, with the average driver paying 40% more for single driver car insurance policies this year than they would have with the same terms in 2010 according to MoneySupermarket.com. This is on top of the rising cost of fuel, something which is only going to become more of a problem in the coming years as fossil fuel supplies dwindle.

For many years there has been a trend for an increasing number of middle class students deciding to commute to University from home in an attempt to avoid the costs involved with living away. This is an attempt to avoid taking out potentially expensive loans in order to get them through University. However, is this still viable in light of rising motoring costs?

Changing insurance markets

Car insurance prices are a major cause for concern in the motoring world, with the average driver now paying $1,445 per year for car insurance alone. This represents an increase of 154% over the past decade.

Young students are the group worst effected by this, with drivers between the ages of 17 and 22 having been subjected to rises of 64% in the past year alone. The disproportionately high prices offered to young drivers is believed to be artificially inflating the average car insurance premium figure, with drivers between the ages of 17 and 22 paying an average annual car insurance premium of $3,938.

These prices rises are predominantly a result of an increase in the number of fraudulent claims being made by motorists, with the BBC claiming that there has been a 70% increase in the number of personal injury claims being made over the past decade. These additional costs, which the insurers are being forced to meet, are ultimately being passed onto motorists in the form of higher basic car insurance prices.

On top of this, insurers are now omitting elements of their car insurance package which previously came as standard. This means that insurers who previously included breakdown cover in their insurance offerings may now have omitted the additional feature in any subsequent renewals and are not under any legal obligation to highlight this fact to customers.

Verdict: Prices up by an average of 154% over the past decade. The average driver between the ages of 17 and 22 is now paying $3,938 per year for car insurance policies which no longer have as many additional features (such as breakdown cover) included.

Rising fuel costs

Due to declining raw oil supplies and various other political conflicts, the price of a barrel of oil have risen from $40 to the current $70 in the past decade, an increase of 175%.

This has resulted in the average gasoline prices in filling stations within the USA rising from $1.20 in 2001 to $3.90 in 2011. The average driver completing 12,000 miles per year will therefore be paying $3,667 more per year than previously.

Verdict: Fuel prices at the pumps raised by 325% in the past ten years, adding an additional $3,667 per year to the average drives running costs.

Conclusion

The average student driver is now paying $3,667 more for fuel and $2,381 more for insurance than they would have ten years ago, a combined total of $6,048 extra per year which would go some way towards cover the cost of a single year of tuition at University or a year of living away from home.

It therefore seems to regardless of whether a student decides to live at home or move away, the average middle class American student will still be forced to get a loan at some point. It therefore seems that getting competitive prices loans with low interest rates for educational purposes has never been more important.