Student Loan Blog : Project on Student Debt

Students Increasingly Choosing Private Student Loans

Student Loan Girl — Wed, 22 Apr 2009 22:39:00 GMT

According to analysis of Department of Education data released last week, the number of college students taking out private student loans over the last five years has risen sharply. Analysis by student advocacy group The Project on Student Debt revealed that the percentage of all undergraduates who took out private student loans last school year jumped to 14 percent from 5 percent during the 2003–04 academic year (“New Data Show Big Increases in Private Student Loan Borrowing,” The Project on Student Debt press release, April 21, 2009).

The data showed that students attending schools that charge more than $10,000 in tuition and fees were more likely to use private student loans than were students attending less costly institutions. In fact, these for-profit colleges and universities saw the percentage of students who took out private student loan skyrocket to 42 percent last year compared to 13 percent five years ago.

The Project on Student Debt also found that slightly more than a quarter of private student loan borrowers didn’t take out federal student loans: 14 percent didn’t even apply for federal financial aid, and 12 percent filled out the Free Application for Federal Student Aid but chose not to take out a federal Stafford student loan.

These federal student loan statistics are particularly concerning, said Laura Asher, acting president of the Institute for College Access & Success, which runs The Project on Student Debt, because federal loans are available to nearly all students, regardless of their income, and because federal loans tend to have more favorable interest rates and repayment terms than private student loans.

“Too many students,” Asher said, “are missing out on federal loans and going straight to one of the riskiest borrowing options.

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College Grads in New Hampshire Get $8,000 Incentive to Work in the State

Student Loan Girl — Fri, 06 Mar 2009 23:24:00 GMT

Hoping to entice more college students to work in the state after graduation, the University System of New Hampshire is partnering with the state’s employers to offer students an incentive to stay.

New Hampshire graduates who work for an employer participating in the school’s new Stay Work Play Incentive Program and agree to work in the state for at least four years could receive up to $8,000 from their employer to help pay down their student loans, the New Hampshire Union Leader reports (“Push On to Keep Grads in NH,” March 2, 2009).

On average, New Hampshire college graduates leave school with $25,000 in student loan debt — the second highest level of student loan debt in the nation, according to the Project on Student Debt, a California advocacy group.

The Stay Work Play Program, slated to begin this fall, is open to employers who hire entry-level workers in the state.

Participating employers — who will make payments directly to a graduate’s student loan provider — will contribute $8,000 toward the federal student loans of graduates who received a two-year or a four-year degree from a New Hampshire college or university within the last 36 months. Graduates will receive $1,600 a year during their first two years on the job, and $2,400 a year during their last two years.

The state is hopeful that the new initiative will entice more college graduates to begin careers in New Hampshire, reducing the “brain drain” typically seen when graduates seek out-of-state employment. And employers, looking to fill vacant engineer and technician positions left by retiring baby boomers say the new program could also prove to be cost-effective. By helping employers find local talent instead of recruiting qualified candidates outside of the state, employers could save on relocation and training expenses.

Tom Daly, chief technology officer at Dynamic Network Services, an Internet services provider, says that the new incentive program could give recent college graduates a good reason to stay in the state.

With less student loan debt, employees may be able to better afford to buy a home in New Hampshire, Daly says. “If we can get that level of commitment, we’re not going to have brain drain.”

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High Debt Loads Burdening New Hampshire College Graduates

Student Loan Girl — Thu, 31 Jul 2008 23:43:00 GMT

New Hampshire provides its students with less financial aid than most of its neighboring New England states — a finding that suggests the state’s financial aid system may be in need of reform, according to an article in Foster’s Daily Democrat (“Student Loan Burden Grows: N.H. College Grads Carry 2nd-Highest Debt Load,” July 27, 2008).

College students in New Hampshire, home to some of the nation’s most expensive colleges and universities, tend to accrue larger amounts of debt than students in other parts of the country.

According to the Project on Student Debt, New Hampshire borrowers leave college with an average of $25,000 in student loans, a debt burden that is second only to Washington D.C. borrowers who have an average of $27,757 in student loans. The national average is $21,000.

New Hampshire’s Limited Education Funding May Contribute to Students’ High Debt

One reason New Hampshire borrowers have such high debt may be that the state provides minimal funding for higher education, forcing some students to borrow more to pay for school, said Erin Hathaway, a spokesperson for the New Hampshire Higher Education Assistance Foundation.

Although, the University System of New Hampshire’s board of trustees has increased the amount of scholarships and grants it offers to in-state students by 14.2 percent over the past year, the state university system’s financial aid fund is still only $3.7 million. By comparison, the state university system in neighboring Vermont, which has a population half the size of New Hampshire, has $18.6 million set aside for financial aid.

With minimal financial aid available, students often rely on student loans. According to a survey of 1,500 NHHEAF borrowers, 82 percent said that they wouldn’t have been able to attend school without the help of student loans.

The NHHEAF survey, “Borrowing for a Brighter Future,” also found that over a third of students who responded may be taking out too much in student loans without being fully aware of the responsibilities that go along with borrowing or the consequences of defaulting on their loans.

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Word to the Wise on New Loan Forgiveness Programs: You May Not Qualify

Student Loan Girl — Tue, 10 Jun 2008 22:56:00 GMT

College students looking to relieve their federal student loan debt “will be sorely disappointed” with the government’s new loan forgiveness programs that will begin in 2009, according to an article in U.S. News & World Report (“The Problem with Federal Loan Forgiveness Programs,” May 28, 2008).

Under the public-service loan forgiveness program, students must make payments on their student loans for 10 years before the loans can be forgiven, said Diane Auer Jones, assistant secretary for postsecondary education, at the College Savings Foundation conference last month. Since a majority of federal student loans have a 10-year term, there may be no loan balance left to be forgiven.

In addition, the Department of Education is concerned that "some students will see the program and take on more debt than they would have otherwise, not realizing it is unlikely that most of their loans will be forgiven," Jones commented.

The public-service loan forgiveness program grants $4,000 in “Teach grants” to students studying to be teachers in “high need” classrooms. But teachers who accept the grants and do not end up working in needy schools, will see those grants turn into loans that have to be repaid. Based on the outcome of similar government programs, up to 80 percent of grant recipients ended up having to repay their grant-turned-loan with interest, U.S. News reports.

Robert Shireman, director of the Project on Student Debt, suggests instead that students consolidate their loans under the federal government’s new Income-based Repayment option. The program allows low-pay service workers to make reasonable monthly payments based on their income level and to have the balance of the loan forgiven after 120 payments.

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Student Loan Debt Is on the Rise, and College Grads Face Growing Financial Obstacles

Student Loan Girl — Sun, 04 Nov 2007 20:10:00 GMT

Money. Some of us have it. Some of us need more of it. Particularly recent college grads transitioning from their campus to the workspace, from having student loans available that help pay their living expenses to having to make it on their own—all while paying back those student loans that paved their way to graduation.

With the surge in student loan debt outpacing the growth in starting salaries, and with tuition increases far exceeding increases in federal financial aid, a growing number of college graduates are facing barely manageable levels of student loan debt.

Tuition Hikes Outstrip Increases in Federal Financial Aid Awards

“Student aid continues to grow, but not as fast as tuition, and not enough to make up for the difference between family incomes and the price of college,” says Larry Abramson in a story for National Public Radio (“Tuition Hikes Outpace Student-Aid Increases,” Oct. 26, 2007).

According to the College Board’s “Trends in College Pricing” 2007 report, average published tuition and fees for in-state college students at four-year schools climbed by 6.6% for the 2007–08 academic year, a hike that “outpaced increases in the financial aid that lowers what most students actually pay” writes Erica Perez in the Milwaukee Journal Sentinel (“College Costs Outpace Inflation,” Oct. 23, 2007).

Starting Salaries Increasing More Slowly Than Student Debt

With more tuition to have to pay, students are graduating with more student loan debt than ever. In 2004, two-thirds of college graduates left school with student loans, and between 1993 and 2004, the average debt for college graduates with student loans soared a staggering 107%, according to a report by Luke Swarthout, a Higher Education Associate for the U.S. PIRG Education Fund. Student loan debt, Swarthout notes, is rising faster than both the cost of living and the cost of health care (“Student Debt and Consumer Costs in the Minneapolis–St. Paul Area,” July 2006).

Student debt levels are also eclipsing income gains. The “rapid rise in student debt comes while the real median income of younger Americans has only modestly increased” by 4.4% between 1995 and 2004 for household earners under 35, writes Swarthout.

Starting salaries for recent graduates can’t keep pace either. A report on “Student Debt and the Class of 2006” released by the Project on Student Debt found that for graduating seniors, average student loan debt rose 8 percent between 2005 and 2006, while starting salary offers rose only about 4 percent.

“Too many young people leave college saddled with heavy debt burdens and struggle to cover their loan payments on top of basic living expenses,” says Robert Shireman, Executive Director of the Project on Student Debt, in a press release for their recent study. “Students need better options and counseling when they’re deciding how to pay for college.”

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