For college graduates, average student owes $35,000 in debt: Here’s information on possible relief
Corinthian College, a school that’s based off of Santa-Ana for-profit career schools almost died under the weight of allegations of fraud. However, the Obama administration has just announced a new loan-forgiveness plan for previous students of this school last week.
Although this could be a step in the right direction for Corinthian students, the problem the rest of the nation’s schools face with borrowers goes unattended to.
As tuition increases, so does the amount od debt students face; the new record balance of student debt is now coming up to $1.2 trillion. Federal loans are here to help college students so, relatively, this number could be worse but right now, it’s not that bad. Yet, this doesn’t make debt something that should go unnoticed, many students still suffer under the crippling weight of it.
To put it in perspective, student loans are the second source, next to mortgages, of consumer debt. Who wants to buy a home when they’re swimming in debt? This is why many young adults do not buy houses.
Q: Why is student debt getting so much attention now?
A: Because student debt is increasing. College students these days are indebted carrying loans of $35,000, says Mark Kantrowitz, who is the senior vice president of Edvisors.com. These figures include federal and private loans; it is more than twice the average debt of 2000 graduates.
As tuition has increased, 71% of graduates have taken out loans, which is less than half of the graduates of 1994.
Q: Are today’s students more likely to default?
A: This depends on what comparison you want to look at. 22.4% of those who borrowed through loans defaulted their loans within the next 2 years in 1990. 6% was the overall default rate by the time 2000 came around. However, this number dropped before rising in 2006.
When calculating the amount of students that defaulted, the government required a longer time period for defaulting. In the last year, this rate was at 13.7%.
90-day delinquency rates have become a trend for students who take out loans. The late payment rate of late last year reached 11.3% all the while other debts such as mortgages and car loans, remained steady, concludes a February report from the New York Dederal Reserve.
Q: Are students stressed out by debt?
A: Mark Schneider, president of College Measures says, “it’s not just debt, it’s what that debt is in relation to what people make.”
After recession, recent graduates stood face to face with doleful job likelihood. Even with a recovering economy, unemployment is still a big hitter in America for college graduates looking for jobs in their intended fields. Experts have concluded yet another issue is on the rise: the amount degrees cost for lower-income jobs.
Chief development officer and director of counseling for Consumer Credit Counseling Service in Orange County, Natalie Lohrenz, explains that she gives her clients some advice: not to take out more in loans if it is more than you predict to make in your first year of working.
Lohrenz also says that of course, a student should be ecstatic when getting accepted to one of the best universities. However, if that students dreams of being a social worker, they have to do some thinking in how much they want to take out in student loans.
Q: Do parents and their 18-year olds need to think about returning on their college investment?
A: Yes, Lohrenz says, “is this investment going to pay off?”
In higher education, the investment and value of a college degree has been a hot-topic in recent years. California’s community college system gathers data on salary for it’s graduates. Many public universities charge a more expensive rate in tuition for those who will go into potentially profitable fields. In seven states, College Measures records the profit of those who have earned a degree. However, says Schneider, to get solid information about the value of a degree at most of America’s colleges is very difficult.
Q: Should colleges and universities start to play more of a role in the lives of their students?
A: Yes, that is the plan. President Obama’s proposal of college ranking ties together the federal funds of academic institutions’ presentation on metrics; this includes graduation rates, future earnings, and average default rates, Mamie Voight says. Voight is the director of policy research for the Institute of Higher Education Policy. She says, “It’s gotten a lot of pushback from institutions of higher educations.”
Some believe that considering the future pay will oversimplify such a difficult situation. A previous policy adviser of the U.S. undersecretary of education, Karen Gross, states in “Inside Higher Ed” last year that college students from a higher-income, more profitable family have bigger networking opportunities. Given this, universities would be gratified in having successful, well-off students.
Q: How can not paying student loans negatively affect someone?
A: There is a chance not paying off student loans won’t end well for you. By defaulting your student loans, you lose access to a better repayment plan, your credit scores will also drop. You just cannot discharge your loans when you are in bankruptcy. To add, your wages may enhance or your potential tax refunds will be applied to a balance.
Q: Who has it worse off?
A: Certainly, students who don’t finish have it hard. Only 6% of students who go into a four-year school will graduate in within six years. Lauren Asher, who is president of The Institute for College Access & Success, says “it can be tough to graduate with a lot of debt, but it’s even tougher if you don’t graduate.”
Statistically, Black people and Latinos are more likely to be brought down by student loans than any other race. Center for American Progress report in 2013 that need-based federal aid for low-income students turns inadequate to help with increasing tuition.
Q: What can be done right now about this problem?
A: The Obama administration has laid out programs to help graduates who are struggling. These programs help size their loans according to their income. Not many people realize programs such as these exist, so they have not been used as often as they should. However, lenders of these programs target graduates with high incomes, not the ones who would be struggling to pay their loans.