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Copyright © 2010
What you should know about
Student Loan Debt.
Student Loan
Debt In America
2 Student Loan Debt in America
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| Introduction
| The Crisis Is Real (Facts)
| The Need for a Degree
| Stagnant Wages
| The Effect on Individuals
| So What Now?
| About NBP
All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any
form or by any means, including photocopying, recording, or other electronic
or mechanical methods, without the prior written permission of the publisher, except for certain
noncommercial uses permitted by copyright law.
3 Student Loan Debt in America
much so that it has entered the presidential campaign's hot-button
soundbite arena. Democratic presidential hopeful Bernie Sanders
has gone so far as to propose making tuition completely free at all state
colleges and universities. Both Sanders and rival Hillary Clinton have
proposed various ways to minimize student debt. In a May 2016 New
Republic article, Donald Trump proposed a two-prong reform that would
strive to achieve the following goals:
• Change the student loan program to provide more incentives for
colleges and universities to enroll students who will be successful and
earn enough money upon graduation to pay back their loans
• Return the federal loan program to its pre-Obama status by having the
loans come from private lenders rather than the federal government
A college education remains the best way to ensure a successful
career, but a number of factors in recent years have increased the cost
of this education while simultaneously making payment more difficult.
Debt-ridden students are unable to buy homes and cars, and this
failure to reach certain economic milestones on their way to achieving
the so-called American Dream adversely affects the overall U.S.
economy.
Student loan debt has become a staggering national problem, so
4 Student Loan Debt in America
One in four student loan borrowers are either in delinquency or default on
their student loans, according to the Consumer
Financial Protection Bureau.
The recent statistics about student debt are simply staggering. Student
loans make up the nation’s second largest consumer debt market,
which has grown rapidly in the last decade.
• The Consumer Financial Protection Bureau (CFPB) reports the total
volume of outstanding student loans has more than doubled, rising
from less than $600 billion in 2006 to more than $1.2 trillion today.
• According to Forbes, student loan debt constitutes the second-highest
level of consumer debt behind only mortgages. Most of that is
comprised of loans held by the federal government.
• MarketWatch states that about
40 million Americans hold
student loans and about 70
percent of bachelor’s degree
recipients graduate with debt.
Edvisors reports that in 2015, the average total student loan debt at
graduation, including both federal and private student loan debt, was
about $35,000 for bachelor’s degree recipients, $51,000 for master’s
degree recipients, $71,000 for Ph.D. recipients, $167,000 for law school
graduates and $207,000 for medical school graduates.
1 in 4 student loan borrowers
are either in delinquency or
default on their student loans,
according to the Consumer
Protection Bureau.
5 Student Loan Debt in America
Last September, a Brookings Institution study
found the increase in the percentage of students
borrowing to attend for-profit colleges and two-
year community colleges accounts for a large
share of the growth in the number of students
struggling to pay off their loans.
In 2015, the government implemented its gainful
employment rule, which requires for-profit
colleges to prove that it is preparing graduates
to get a job in order to continue to receive
federal financial aid funding.
“We are concerned
about our graduates’
ability to repay their
student loans, and we
are continually
exploring new tools
and strategies to help
students understand
their options and
ultimately meet their
obligations,” Hardman
wrote in a statement.
6 Student Loan Debt in America
Having a four-year degree displays commitment and dedication; for
employers, that degree acts as a broad screening tool to help recruit better
workers. In February 2013, the New York Times reported that many employers
require a college degree for even file clerks and in-house couriers earning $10
an hour.
In its recent study, Boston-based Burning Glass, a company that analyzes job
ads from more than 20,000 online sources, concluded that an increasing
number of job seekers are being shut out of middle-skill, middle-class
occupations by employers’ rising demand for bachelor’s degrees.
Moving the Goalposts: How
Demand for a Bachelor’s Degree Is
Reshaping the Workforce
An increasing number of job seekers
face being shut out of middle-skill,
middle-class occupations by employers’
rising demand for a bachelor’s degree.
This credential inflation, or
“upcredentialing” is affecting a wide
range of jobs from executive assistants
to construction supervisors and has
serious implications both for workers not
seeking a college degree and for
employers struggling to fill jobs.
Burning Glass
7 Student Loan Debt in America
Requiring a degree may make the task of finding the right
person much more difficult, yet many employers are willing to
wait.
This credential inflation affects a wide range of jobs, from executive
assistants to construction supervisory positions. This has serious
implications for workers not seeking a college degree and for
employers struggling to fill jobs.
• There has been a marked shift in occupations formerly
dominated by workers without degrees. For example, 65
percent of postings for Executive Secretaries and Executive
Assistants now call for a bachelor’s degree. Only 19 percent of
those currently employed in these roles have a B.A.
• In other occupations, such as entry level IT help desk positions, the
preference for a bachelor’s degree has increased even though the skills
indicated in job postings don’t include skills typically taught at the
bachelor’s level. In fact, there is little difference in skill requirements for
jobs requiring a college degree from those that do not, suggesting that
employers may be relying on a B.A. as a broad recruitment filter that
may or may not correspond to specific capabilities needed to do the job.
• The research revealed that certain types of positions that require a
B.A. take 61 days to fill on average, compared with 28 days for
postings that don't require a bachelor's degree.
Other key findings of the report:
8 Student Loan Debt in America
All this means that more
students are going to
school with less money to
pay for it.
Long Term Effect On Individuals
In 2013, the government garnished about
$150 million in Social Security benefits
from Americans to pay back their student
loans.
Americans’ wages have basically remained stagnant. According to Pew
Research, for most U.S. workers, real wages — after inflation is taken
into account — have been flat or even falling for decades, regardless of
whether the economy has added or subtracted jobs. The average wage
peaked more than 40 years ago: The $4.03-an-hour rate recorded in
January 1973 has the same purchasing power as $22.41 would today
(2014). All this means that more students are going to school with less
money to pay for it, and parents are having a harder time coming up with
the cash required to send their kids to college.
According to Marketwatch,
the gap between the
earnings of high school
and college graduates hit
a record high in 2013, in
large part because the
wages of high school graduates have dropped off precipitously over the
past few decades.
9 Student Loan Debt in America
The job market’s increased need for a degree, coupled with the enormous
financial burden of college, adds a crippling burden to graduates
embarking on their futures. How many teenagers can fathom what a debt
of $100,000 or more means to their future? How will it impact their ability
to buy a home or plan for children and their eventual college education?
Indeed, the current system of financial aid and rampant student
indebtedness is producing devastating long-term consequences. In Kelley
Holland’s article about the crisis, associate professor of practice in the
10 Student Loan Debt in America
School of Social Welfare at the University of Kansas Melinda Lewis, who
has studied the current system of financing college, says, "It has
reduced the ability of our educational system to be a force for upward
mobility.” She adds that while it is still true that you are better positioned
if you go to college, you are not as much better positioned if you have to
go to college with debt.
Demos, a public policy think tank, found that home ownership is
significantly lower among 20-something households: 52.3 percent of
those households with student loan debt own homes, compared to 58.8
percent of households without student loans.
November 2015 data from LIMRA, an association providing research
and consulting to insurers, shows that just $30,000 in student debt can
cut as much as $325,000 from a 401(k) balance by the time or
retirement. The institute also examined the amount of education debt
held by those close to retirement and found a sharp increase over 25
years. In 1989, just four percent of people aged 55 to 64 had education
debt, but by 2013, that figure had grown to 30 percent.
In 2013, the government garnished about $150 million in Social Security
benefits from Americans to pay back their student loans, according the
Government Accountability Office. Between 2002 and 2013, the number
of senior citizens losing out on a portion of their Social Security to pay
back education debt soared from 6,000 to 36,000.
11 Student Loan Debt in America
After college, a graduate must choose a debt repayment method for his or her
student loans. Exit counseling about repayment is required when a student
graduates, leaves school or drops below half-time enrollment. “When you
graduate, you have about six months to figure out what you’re going to do to
repay your loans,” said Ian Foss, a policy liaison with the U.S. Department of
Education. Therefore, graduates should get started immediately, as default will
cost them dearly in the long run. Student loans can be the key to a college
education and a life of increased Therefore, graduates
should get started
immediately, as default
will cost them dearly in
the long run.
opportunity and earning prospects, but
students and parents need to educate
themselves before deciding how much
debt to take on. An honest appraisal of
earnings prospects, future goals, the true cost of college and the effects student debt
is required. Such an assessment is essential to avoid hamstringing your future.
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