It might seem like the title of this article is a sensational headline to instill fear. In reality, the student loan debt problem continues to grow out of control in this country. According to the National Center for Education Statistics, the typical student will loan $6,600 this year. That averages out to be around $22,000 by the time they graduate.
It’s one thing to look at the numbers. Most college students have already resigned to the fact that they will have student loan debt once they graduate. Yet, it’s the default rate that’s concerning. In 2012, just over 10% of students defaulted on their loans. Over the next few years, that rose by 16% and continued to climb.
Student Loan Debt is Crippling Students
Overall, as many as 30% of the students who graduated struggled to repay loans. $23 billion was owed and $9 billion of it was in default this past year alone. This is a growing problem that has no end in sight. It is reaching crisis-levels as students become unable to pay back their loans. The number of defaults is rising significantly.
The worse part about it is, the government is overlooking it. Schools continue to rake in major profits in federal aid. Because they are subsidized, they can continue to raise the cost of college for everyone. Federal laws have attempted to keep colleges accountable. It requires them to keep the number of defaulted borrowers below 30% to remain in the student loan program.
There is hope for some students, but they must know their options. Student loan forgiveness is one option available, as well as lower monthly payments and interest. To find out if you qualify, call Financial Helpers today at:
High Default Rates
Back in 2012, the government still cared about keeping the default rates low. 93 schools were at risk of being kicked out of the aid program due to having high default rates. In just a few years, the feds decided to stop tracking and suddenly the number rose to 636 schools. What do the colleges care? The government gives them money.
Also: http://financialhelpers.com/student-loan-debt-crosses-the-1-5-trillion-mark/
For-profit schools have an even worse track record. 44% of students who obtained student loan debt were facing major financial distress. 25% of them defaulted on their loans. This was only a few years after being in the repayment program. It often takes students a decade or longer to repay them in full.
Why is this Happening?
In order to maintain within federal levels of default, colleges have been using a nasty strategy. They have been aggressively telling students to use forbearances and deferments. This may pause their loans for the time being while they struggle, but it’s a sneaky way of avoiding the situation. As long as the schools get their money, they’re happy.
For many, high interest rates make it nearly impossible to pay back the loan. They owe too much money, and if something happens and they can’t afford the loan, that’s it. It grows exponentially larger. Yet, the government keeps avoiding the problem as they flow more money into schools.
The truth is, to tackle this problem, the federal government, individual states, and schools need to make changes. They should all work together to make college more affordable. By forcing students to rely on loans, they’ve turned what used to be a great investment into an economic nightmare.
