Student loan debt and default are on the rise. It has already surpassed credit card debt on the public books, and specialists don’t see a roof. According to the most recent United States Department of Education data, federal student loan default elevated dramatically in fiscal 2010. An 8.8 percent default rate across all types of U.S. universities was observed. Even scarier is the belief that the rate went up to a whopping 15 percent at for-profit colleges. Article source: Student loan default at highest level in years
People are not paying loans back
The New York Times reports that there was an enormous increase in default for student loans. There was a rise in default for for-profit universities from 2009 to now. It went up to 15 percent from 11.6 per-cent. U.S. universities saw an increase from 7 percent to 8.8 percent in the same years while public institutions went up themselves from 6 percent to 7.2 percent. In 1997, the loan default rate was at 8.8 percent, making this the highest it has been since that time. That’s considerably lower than the 20 percent student loan default rate seen in 1990.
“Borrowers are struggling in this economy,” said James Kvaal, deputy undersecre-tary of education. “We see a strong relationship between student default rates and unemploy-ment rates.”
How the pack follows
The Institute for Higher Education Policy did a study. It showed that there are two students that get behind in payments to student loans for every one student that defaults. Only 37 percent of student that started loan paying in 2005 have not missed any payments. There is work in progress to get a big-ger three year default window to figure out what the problem is for the Department of Education.
Could not be giving all colleges aid
Many people don’t know, but schools are affected by the situation also. The more loan default, the worse it is for the university. Four of the Kvaal universities are for-profit, while all of them lost eligibility for federal student aid. About 80 percent of revenue at for-profit universities comes from tuition. That is why it is simple to see this. Programs that used to be essential to survival were stopped by many of these colleges. The long-term effects of student loan default on such universities remains to be seen.
Massive increases in tuition costs
High unemployment and the recession haven’t stopped students from bor-rowing. The borrowing is really increasing. Even though family incomes and inflation have failed to keep pace with the cost of going to college, many students feel as though they’re mired in a grim catch-22. Students typically don’t want to default on student loans. Still, it is some-times the only thing to happen when there are not jobs available and students are not able to get jobs anymore.
Fewer individuals graduate while student loan debt soars
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Articles cited
New York Times Student loan default (U.S.) Wiki U.S. Department of Education