6 Facts You Must Know About Student Loans and College Debt
If the P-12 education system is all about preparing its students for success in adulthood, then college preparation is obviously a must. In the fall of 2012, 66 percent of high school graduates from that year were enrolled in college, and that number does not include students that waited longer to enroll or non-traditional adult students. It seems that P-12 classrooms are getting more students ready for the academic demands of a college education – but what about the financial commitment?
Currently, there is a call for a more affordable college education, which makes sense. It comes on the heels of a recession that undercut the value of a college education. Even those with a college degree were not immune to the financial hit that the economy took and those still paying off their student loans were often left without the very job they had always assumed would pay off their educational debts.
In this article, I’m going to discuss a few interesting facts and statistics about student loans and debt that will hopefully trigger a conversation about possible solutions to make college more affordable in this country.
- Graduates with advanced degrees are not immune to inordinate debt.
A study by the Urban Institute found that almost 300,000 Americans with master’s degrees were on public relief, along with 30,000 with doctorates. The average debt of a college graduate is $35,200 and that can take decades to pay off.
- Half of black graduates finish school with $25,000 or more in debt.
A recent Gallup poll found that in the last 14 years, around half of black college students graduated with student loan debt exceeding $25,000. Only 35 percent of white students had loan debt that high.
Often the only way for black students to afford a college education is by taking on these loans. Four out of five black students take student loans to attend college and typically have nearly $4,000 more student loan debt compared to white students, according to a 2013 report by The Center for American Progress.
There is deep inequality here in the U.S. In 2013, the median income for black households was $34,600, and the poverty rate is 27%, nearly three times that of white Americans.
- College students with high debt suffer long-term health issues.
According to a new study via Gallup.com, college graduates “who took on the highest amounts of student debt, $50,000 or more, are less likely than their fellow graduates who did not borrow for college to be thriving in four of five elements of well-being: purpose, financial, community, and physical.”
The survey has an area of 25-years as Gallup only polled individuals who graduated college between 1990-2014. What the study found is that graduates who are burdened with $50,000 or more in student loan debt may struggle to repay their loans, which in turn has causes them to delay making large purchases, e.g. buying a new home.
Those saddled with debt are unable to save as much as their counterparts who do not have as much debt or none at all, and Gallup’s “thriving gap,” percentages between those with $50,000 in debt less the percentage of student’s without it, shows an 11 point percentage spread between the two parties.
The study also found that more recent college graduates seem to be performing worse than those who graduated prior to 2000. Those who obtained a college degree between the years of 1990-1999 are doing better socially, physically, and in purpose.
Student loan debt now outweighs credit card debt and has surpassed $1 trillion. With wage growth still stagnant and many individuals going without full employment, this will mean more health issues and many former graduates with void savings accounts as well.
These issues are not left ignored, however. The next few facts about college debt will focus on the solutions proposed and implemented to tackle the issue of college affordability. For example:
- President Obama has reformed student loans.
The Obama Administration has spearheaded college loan reform at the federal level. No stranger to student debt himself (nor the First Lady), he has implemented payment reform starting this year. Under this new plan:
- New borrowers will pay no more than 10 percent of their disposable income towards outstanding student loans.
- Any student debt remaining will be wiped clean after 20 years.
- Public service employees, like military members, nurses or teachers, will have their debt forgiven in 10 years if they make their payments on time.
- Senator Marco Rubio and Oregon propose “paying it forward” instead of paying loans back.
U.S. Senator Marco Rubio spoke about his own efforts in his home state of Florida, and perhaps on a federal level, to make college attendance a shared cost. Rubio is no stranger to college debt. When he arrived at the U.S. Senate, he still had $100,000 in outstanding student loans. Rubio has been upfront about his modest upbringing and also the power his education gave him but he has acknowledged that the cost is too high. The basics of his college plan would allow private investors to pay for the tuition of college students in exchange for a portion of their earnings later on. This would mean the students acquired no traditional debt and would not start out their careers in the hole – at least not in a typical way.
Another college payment idea that is arising across the country is a state-run repayment program that is similar to Rubio’s private investor one. Already in Oregon the Pay It Forward program has been approved (though not yet enacted) that will give students their public college education upfront, free of cost, in exchange for paying the state a portion of their earnings post-college. Supporters bill it as a “debt free” alternative to a college education, but like Rubio’s plan there is still money owed at the end of the college term that does impact actual earnings. It will be interesting to keep an eye on Oregon in the coming years to see how the program impacts the first groups of students who take advantage of it.
- Tennessee and Bernie Sanders want to make education free.
What if a public college education were completely free, though? That’s the approach Tennessee Governor Bill Haslam wants to take when it comes to the state’s community colleges. At his State of the State address, he called for free tuition at Tennessee’s community colleges in order to improve the state’s reputation as one of the least educated. Haslam proposed that the money to pay for it come from the state’s lottery earnings that would be placed in a $300 million endowment fund. While a short-term solution, I’m not sure that this is a sustainable payment plan. But if even one class of students in the state are able to take advantage of it, that may make a huge positive impact on Tennessee’s long-term economic outlook.
Presidential hopeful Bernie Sanders has proposed trying to ease the student loan debt burden that many college graduates now carry and he’s proposing something even more radical: free college tuition to students who attend four-year colleges and universities.
Sanders plans to present his proposal later this week as a way to encourage future labor participation and to combat the ever growing problem with student loan debt.
In his press release about his college tuition bill, Sanders also said that he believes passage of this legislation will help place the United States back at the top of the world in the percentage of people who graduate from college.
According to the Boston Globe by way of commondreams.org, the class of 2015 will carry a student loan debt of $56 billion and is “the most indebted class in history.”
Sanders’ bill has a close to zero percent chance of passing. Still–one has to admire his way of thinking. Student loan debt is out of control and so is the price of tuition at many of the country’s best colleges and universities. For lower income students, they are usually preyed upon by for-profit institutions with promises of attaining a college degree and future job placement.
What do you think about the current affordability of college in the United States? Do you think that any of the proposed solutions come close to hitting the mark?