Transcript The Student Loan Debt Crisis

Student loan debt in America exceeds 1 Trillion
864 Billion in Federal Loans
150 Billion in Private Loans
Source: Center for American Progress, The Student Debt Crisis, October 2012
 Positive impact on persistence of Hispanics and African American
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students as compared to white students (Hu & St. John, 2001).
Student loans negatively impacted African American student
enrollment (Perna, 2000).
Loans negatively impact access, persistence and degree completion,
especially for low and middle income students (Dowd & Coury, 2006;
(Paulsen & St. John, 2002; Kim, 2007) .
Incurring credit card and student loan debt has become an unavoidable
norm for college students regardless of the type of institution they
attend (Pinto & Mansfield, 2006).
Borrowers who drop out of college are more likely to default than those
who attain a degree (Gladieux & Perna, 2005).
Completion leads to successful repayment (Gross, Cekic, Hossler, &
Hillman, 2009).
8 out of 10 young people in families earning
$99,000 per year or more earn a bachelor’s degree
by age 24; among families earning less than
$33,000 per year, however, the attainment rate
drops to 1 in 9.
Source: Dannenberg & Voight (2013)
Subsidized Loans are Need Based (3.4 interest rate)
Unsubsidized Loans are non-Need Based (6.8 interest rate)
Dependent undergraduates
Year
First year
Second year
Third year and beyond
Aggregate
Max. (subsidized and
unsubsidized)
Independent undergraduates
(and dependent undergraduates whose parents are
unable to borrow under the PLUS Loan Program)
Year
Max. (subsidized and
unsubsidized)3
$5,500 — no more than
$3,500 of this amount
may be subsidized
First year
$6,500 — no more than
$4,500 of this amount
may be subsidized
$9,500 — no more than
$3,500 of this amount may
be subsidized
Second year
$7,500 — no more than
$5,500 of this amount
may be subsidized
$10,500 — no more than
$4,500 of this amount may
be subsidized
Third year and beyond
$12,500 — no more than
$5,500 of this amount may
be subsidized
Aggregate
57,500 (23,000 can be
subsidized)
31,000 (23,000 can be
subsidized)
Graduate Students eligible for Unsubsidized loans only as of July 1, 2012; annual limit is $20,500,
Aggregate limit is $138, 500
*Source: TG Online, www.tg.org
Problem: Due to increase in college costs low
income borrowers forced to borrow combination
of Sub/Unsub loans while more affluent borrowers
who attend prestigious/high cost universities
eligible for Subsidized loans
Solution: Increase Subsidized loan limits and
change criteria for eligibility for low-income/Pelleligible borrowers only
Problem: Part time students are able to borrow the
same amount of loans as full time borrowers which
causes them to go into as high or higher levels of
debt
Solution: Align loan eligibility amounts with Pell
grant eligibility; loan award amounts should be
based on actual number of hours enrolled
Problem: Too many options for students; confusion on which repayment
plan to select
 Standard Repayment Plan
 Graduated Repayment Plan
 Extended Repayment Plan
 Income-Based Repayment (IBR) Plan
 Income-Sensitive Repayment Plan
 Income-Contingent Repayment Plan
 Pay As You Earn Repayment Plan
Solution: Create a universal Income Based Plan as the default repayment
option for all borrowers
Old Measurement: The percentage of the number of the school’s FFEL and Direct Loan
borrowers who enter repayment in one federal fiscal year who default in that federal fiscal year or
by the end of the next federal fiscal year
Beginning with the 2009 cohort:
Borrowers who default in that federal fiscal year or by the end of the next two federal fiscal years
*Source: Department of Education; 2010 2yr rate was 9.1; 3yr 2010 rates released in September 2013
*3yr 2009 National Rate is 13.4%
*Official 3yr 2009 Rates as of August 2012 for Texas (16.1) New York (10.9) New Mexico (12.5) Florida (16.2)
California (11.9) and Arizona (22.9)
*Source: Department of Education, August 2012
 Target students (transfers) that have borrowed more than
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90% of the national average (20-23k) and have not
completed atleast 50% of their degree plan
Require Financial Literacy Courses for incoming freshman
and students who become ineligible due to Academic
(SAP) reasons
Require schools to implement intermediate loan
counseling sessions for at-risk populations
Include annual notices/acknowledgement/repayment
amounts to students on current debt before they accept
new loans
Offer repayment incentives for On-Time Graduation
 College Scorecard
http://collegecost.ed.gov/scorecard/
 Shopping Sheet
http://collegecost.ed.gov/shopping_sheet.pdf
 Net price calculator
http://netpricecalculator.collegeboard.org/
 The Chronicle of Higher Education’s College
Reality Check
http://collegerealitycheck.com/
 Student Loans are not going away
 Addressing College Affordability and College
Completion issues will help minimize the student
loan debt crisis
 “Federal Policy should prioritize assisting lowincome students to access and complete
postsecondary education with a simplified process
supported by incentives for continuous enrollment
and timely completion” (Santiago, 2013, pg 3).
 Reimagining Aid Delivery and Design (RADD) Project, Bill and Melinda
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Gates Foundation, 16 different organizations received funding and have
released policy briefs and white papers (Round 2 coming March 2014)
Rebalancing resources and incentives in federal student aid, New America
Foundation, January 2013
Aligning the Means and Ends: How to Improve Federal Student Aid and
Increase College Access & Success, Project on Student Debt, The Institute
for College Access & Success, (TICAS) February 2013
Doing Away with Debt, The Education Trust, February 2013
The Student Debt Crisis, Center for American Progress, October 2012
Federal Student Loan Debt Burden of Noncompleters, US Department of
Education, NCES, April 2013
Forever in your debt: Who has student loan debt and who’s worried?, The
Urban Institute, June 2013
Keeping College Within Reach Hearings, Education & Workforce
Committee, Subcommittee on Higher Education and Workforce Training
Dannenberg, M., & Voight, M., (2013, February). Doing away with debt: Using existing resources to ensure college affordability
for low and middle income families. Retrieved from The Education Trust website:
http://www.edtrust.org/sites/edtrust.org/files/Doing_Away_With_Debt_1.pdf
Dowd, C.A., & Coury, T. (2006) The effect of loans on the persistence and attainment of community college students. Research in
Higher Education, 47(1), 33-62
Gladieux, L., & Perna, L. (2005). Borrowers who drop out: A neglected aspect of the college student loan trend. Retrieved from
The National Center for Public Policy and Higher Education website:
http://www.highereducation.org/reports/reports_center_2005.shtml
Gross, J.P.K, Cekic, O., Hossler, D., & Hillman, N. (2009). What matter in student loan default:
A review of the research literature. Journal of Student Financial Aid, 39(1), 19-29.
Hu, S., & St. John, E. (2001) Student persistence in a public higher education system: Understanding racial and ethnic differences.
The Journal of Higher Education, 72(3), 265-286
Kim, D. (2007). Multilevel analysis of the effect of loans on students’ degree attainment:
Differences by student and institutional characteristics. Harvard Educational Review, 177(1), 64-100.
Perna, L.W. (2000). Differences in the decision to attend college among African Americans, Hispanics, and whites. The Journal of
Higher Education, 71(2), 117-141.
Paulsen, M., & St. John, E.P. (2002). Social class and college costs: Examining the financial nexus between college choice and
persistence. Journal of Higher Education, 73(2), 189-236.
Pinto, M.B., & Mansfield, P.M. (2006). Financially at-risk college students: An explaratory investigation of student loan debt and
prioritization of debt repayment. Journal of Student Financial Aid, 36(2), 22-32.
Santiago, D. A. (2013). Using a Latino lens to reimagine aid design and delivery. Retrieved from the Excelencia in Education
website: http://www.edexcelencia.org/sites/default/ files/latinolenswhitepapermarch2013.pdf