Financing Your Future: Students Feeling the Crunch From School Loans
By Ryan Price
Across the nation, defaults on student loans are increasing as students face rising tuition costs and a weak job market.
The U.S. Department of Education is forecasting that default rates for federally guaranteed loans will reach as high as 6.9 percent for 2007 fiscal year, the most recent year on record. This represents an increase of 2.3 percent from two years earlier and would be the highest rate since 1998, according to the Wall Street Journal.
However, these figures only represent a fraction of the total picture. Tara Bernard said in an article for The New York Times that the Education Department’s default rate only tracks those students who started to repay their loans between October 2006 and September 30, 2007, but who had defaulted by September 2008. The figure does not include loans in deferment or forbearance, nor does it track loans not backed by the government.
The number of students unable to pay back their student loans could be much higher than what the Department of Education is reporting.
Some experts worry that student loans could be the next bubble to burst for the U.S. economy.
“Should private student loans suffer the same sort of failure as [subprime] mortgages, as students graduate or drop out and find themselves unable to pay, we will do serious damage not only to the lives of many students but also to the economic and social fabric of our country that depends on college graduates for its strength,” said Luke Swarthout of the U.S. Public Interest Research Gro in an interview with USA Today.
Rocketing tuition fees have made it almost a necessity for many to take out student loans. Since 1998, college tuition has risen nearly 70 percent, according to www.collegeboard.com. At BYU-Idaho the cost of tuition is not as steep as at other universities see sidebar. During his tenure, President Kim B. Clark has sought to “lower the relative cost of education” as one of his stated imperatives listed on www.byui.edu.
Heidi Cannon, a senior from Wisconsin, took out students loans to help pay for her education at BYU–I
“I didn’t have enough money for school on my own, and I’m borrowing a lot less than I would if I went to [the University of] Wisconsin,” she said.
“Some debt — such as for a modest home, expenses for education, perhaps for a needed first car — may be necessary,” said Elder Joseph B. Wirthlin in an April 2004 general conference address.
Mark Kantrowitz, publisher of popular scholarship search site www.fastweb.com, has some simple guidelines for taking out student loans:
“Do not borrow more than your expected starting salary for your entire undergraduate education,” he said. “If your starting salary is going to be $40,000, then you should borrow no more than $10,000 a year for a four-year degree.”
BYU–I’s education cost to students is lower than many state subsidized schools, according to tuition rates tracked by www.collegeboard.com
Students who are concerned about paying back student loans should work with their lenders. Ignoring student loan payments is far worse than ignoring other types of debt. In August 2005 Congress passed legislation that sets student loan debt on par with child sport and alimony, meaning bankrtcy offers no protection from student loan debt. One can be sent to jail for not paying his or her student loans, according to the Wall Street Journal.
For more information on student loans, visit the Financial Aide Office in Kimball.
By June 2009, 1.8 million students will graduate with an average of $53,527 in debt
65.7 percent of students graduate with student loans
The average four–year student graduates with $19,237 in loans
The average graduate student finishes with $42,406 in loans
Law and Medical students graduate with an average of $80,754 and $125,819 in loans, respectively
One in 10 parents borrow money to help pay for their children’s tuition
Increases in average yearly cost of attendance since 1998:
– Four–year public school 79 percent to $12,796
– Four–year private school 65 percent to $30,367
– The amount of federal student loans has increased 70 percent to $66.8 billion
– Private student loans have increased 540 percent to $16.2 billion
Estimated yearly cost to attend BYU–I for LDS students is $12,030
Sources: www.collegeboard.com and www.byui.edu