Student debt burdens became a dismal reality as economic instability sucked oxygen from the nation’s job creation engines. Will student loans be the next big bubble that challenges the nation’s economy? In a report on the national student loan default rate, the US Department of Education indicates a significant increase in the rate of defaulting, student loan borrowers. The official default rate presents at 8.8 percent of student loan borrowers in default as compared to a previous 7% rate. What can students and families do to avoid becoming part of those grim statistics?
Higher education must empower, not encumber
U.S. Secretary of Education Arne Duncan indicates, “These hard economic times have made it even more difficult for student borrowers to repay their loans. We need to ensure all students are able to access and enroll in quality programs that prepare them for well-paying jobs, so they can enter the workforce and compete in our global marketplace.” Already, the Obama administration and USDOE have called on the higher education community to share best practices that help students complete their education and keep college affordable and accessible to all Americans.
Delinquency adds to default issues
In examining both delinquency and default, The Institute for Higher Education Policy’s report, Delinquency: The Untold Story of Student Loan Borrowing, indicates 41 percent of student loan borrowers face the negative consequences of delinquency or default. That data illustrates more borrowers are having difficulty repaying their loans in a timely manner than is generally recognized when the focus is on default rates alone.
At a time when student debt is increasing, it’s important to examine both delinquency issues as well as default rates. From a public interest and higher education policy perspective and in alignment with the American dream, student success needs to be defined not only as access to college, but also persistence to a degree or certificate with entrance onto a stable, 21st century career path, and the effective management of student loan debt. In other words, access to college needs to target and achieve real world success and life empowerment.
Storm clouds over the road ahead
Chuck Bentley, CEO of Crown, a non-profit that focuses on business practices, debt reduction, and financial decision-making, warns student loans may be the next, big bubble that challenges our economy. CEO Chuck Bentley indicates, “Parents and students are taking on tremendous debt right now in pursuit of future careers that may not provide the income to match the loan payments.” He notes collapsing bubbles in recent years have taken economic tolls across the landscape, from Internet start ups to the housing market.
Finaid’s student loan clock ticks toward trillion dollar mark
Finaid, an award-winning, public service site of comprehensive student financial aid information tools, runs a Student Loan Debt Clock that shows approximately one trillion dollars of debt already exists among a relatively small number of borrowers, 36,000,000 college alumni. Finaid reports that for the first time in history, student loan debt now eclipses credit card debt.
Finaid offers practical tips on education financing
It’s an imperative that students seek opportunities to minimize debt and analyze their education financing strategies. Finaid offers several key, practical tips for consideration in that process.
- Borrow federal first. Federal loans are cheaper, more available and have better repayment terms than private student loans. The unsubsidized Stafford and PLUS loans are available without regard to financial need, so you don’t have to be poor to qualify.
- Live like a student while you are in school, so you don’t have to live like a student after you graduate.
- Do not borrow more for your entire education than your expected starting salary after you graduate. Otherwise you will find it difficult to repay the debt and will be at higher risk of default.
- If you are borrowing more than $10,000 per year for college, switch to a less expensive school.
- Submit the Free Application for Federal Student Aid (FAFSA) to apply for federal and state grants
- Search the Fastweb Scholarship Database to find scholarships for which you are eligible. Every dollar you get in grants and scholarships is a dollar less you will need to borrow.
Free, online publications from Crown facilitate financial decisions
Crown CEO Chuck Bentley asks, “How is it that when almost every other sector of the economy is scaling back expenses, costs at public universities have risen 8% a year? A good question for parents and students to ask themselves is whether they are getting the best value for the costs.” In a knowledge economy, higher education and lifelong learning are integral. Budgeting for the best values in education costs is a multistep process.
To facilitate parents and students in financial matters, Crown offers free publications, available for online download in PDF formats, that cover topics ranging from budget guides (available in Spanish), college funding, home business, mutual funds, debt elimination, and career resources.
Key US Department of Education resources inform decision-making
As part of its effort to help students make informed decisions about their choice for higher education, the US Department of Education has released College Affordability and Transparency Lists, available to the public without cost, at the USDOE’s College Affordability and Transparency Center. The site highlights institutions with high and low tuition and fees and shows institutions where tuition and fees and net prices are increasing at the highest rates.
Additionally, the USDOE provides a full portal, Student Aid on the Web, dedicated to facilitating funding education beyond high school. It offers information on repayment plans and calculators, information on postponing repayment as well as the nation’s public service loan forgiveness plan, and an introduction to the Free Application for Federal Student Aid with access to the FASA form.
Education is an essential 21st century bridge
Continuing and higher education is a bridge from adolescence to an empowered career path and successful life. In a global knowledge era, everyone loses if that bridge collapses, if delinquent loans and defaults create an environment where education’s values are threatened for our learners.
George Washington Carver once asserted, “Education is the key to unlock the golden door of freedom.” Education remains a key and essential bridge to 21st century success. It is integral to our nation’s future and economy that crippling burdens of cost do not transform continuing and higher education into broken bridges to nowhere.
Find the take in this article to be helpful? Feel free to share out the link of this article. Use Digg, Facebook, email, Twitter, or your blog. The writer is a former US National Technology and Learning Teacher of the Year, a former US Web-based Education Commissioner during the Clinton administration, former Vice President of Global Knowledge Exchange, and a published poet and photojournalist, now writing on National Education issues. To keep current on similar articles, view the suggested links below and click the free, “subscribe to get instant updates” link at the top of this article to get a conveniently customized news delivery.