One of the most frequently mentioned grievances on the We Are The 99 Percent site is excessive student debt. To supplement what I have already written on the topic I have invited guest posts. This is from a representative of American Student Assistance. I did my own field research by venturing out from the geriatric wing of 1400 Computer Drive and interviewing the young people who are occupying the cubes and interior offices. Although some of them have a touch of schadenfreude as they contemplate the fate of their high school classmates who mocked them because they went to Worcester State College (current tuition and fees less than $8.000 per year) to major in accounting, there were more than enough sobering stories of friends and relatives who had made other choices.
Over the next month or so, the first student loan payments come due for students who graduated from college last spring. Unfortunately the Class of 2011 faces some grim statistics. Students today are borrowing twice what they did a decade ago, with an average student loan burden of about $25,000 (although some students borrow considerably more). Meanwhile, the Economic Policy Institute reports that 9.3% of college graduates younger than 25 are unemployed, while the rate for those older than 25 is 4.7%. The news is even worse for those who left school without a credential: The unemployment rate for those without a college degree under age 25 is 22.5%. For those lucky enough to land a job, the median starting salary (for students graduating from four-year colleges) is around $27,000, down from $30,000 in 2008. And the number of college graduates aged 25 to 34 “under” employed in food service, restaurants and bars rose 17 percent from 2008 to 2009.
Fewer jobs and lower salaries for college-goers have naturally taken a toll on student loan repayment. The national student loan default rate recently reached its highest point, 8.8%, since 1997. But default, officially classified as 270 days of non-payment, doesn’t even scratch the surface of the real story of struggling student loan borrowers today. According to the Institute for Higher Education Policy, for every one borrower who defaults, two more fall behind on payment by 60 days or more and as a result, they face damaged credit and higher interest on other forms of consumer credit. In fact, only 37% of federal student loan borrowers were able to make their student loan payments without interruption over the last five years.
The good news is that the federal student loan program was actually built to withstand economic times like these. Federal student loan borrowers have multiple rights to keep their student loans above water (more on those later). The bad news, though, is that the federal government hasn’t exactly made proactively educating borrowers about their rights a number one priority up to this point. That means it’s up to individual borrowers to be proactive and arm themselves with information as they navigate student loan repayment. Sounds daunting, but here are three steps to get you started if you’re overwhelmed by student debt.
(A word about private loans . . . Private or “alternative” loans are loans made by a private lender that are not backed in any way by the federal government. Unfortunately, these loans typically do not offer borrowers the same repayment rights found with federal loans. But all is not lost; if you’re having problems repaying, you should still contact the lender and see if they will work with you to help you avoid default. Also, the relatively new Consumer Financial Protection Bureau is rumored to include a “private student loan ombudsman” in the future to assist borrowers, so that may be an additional resource down the road. Speaking of ombudsmen, there is also a Federal Student Aid Ombudsman to help individuals after they’ve tried other ways to resolve a federal student aid dispute.)
Michael Ryan is a vice president for American Student Assistance, a nonprofit that helps college students and alumni successfully manage education debt by giving them money smarts they can use for a lifetime.