It is no secret that student debt is becoming a massive problem in the United States, threatening both the financial futures of students bogged by debt as well as the economy as a whole. But according to new data released by the Education Department, it may be even worse than many people thought. In fact, the student loan system may be failing fast.
With tuition rates the highest they have ever been (and still rising), many students are forced to take out massive loans to cover the costs of their education. The problem is, unless they can find equally well-paying jobs after graduation, paying back their loans may be enormously difficult. And currently, the market for well-paying jobs is scarce. Even if a graduate is lucky enough to find a low-wage job, between rising food and housing costs, paying back student loans may be impossible. Many students find themselves in a seemingly endless loop of paying down interest without ever touching the principal of their loan.
In the past, Congress calculated the percentage of borrowers who have recently left college and have defaulted on their federal loans and applied this data to a college’s eligibility in the financial aid system. While this rule was successful in reducing the number of colleges with default rates that were too high, it was not an entirely accurate way to measure the root of the problem. Now, instead of using default rates, Congress is usingnonrepayment rates, which measure the rate of borrowers and defaulters who have not repaid a single penny of their loans. The results of this adjustment are surprising – American National University, for example, formerly had a default rate of 8.5 percent, but their five-year non-repaymentrate was a staggering 71 percent. Nearly three-quarters of their students had not made a single payment towards their principal, because nearly three-quarters of their students had to delay their payments due to financial hardship or other factors. The popular for-profit institution University of Phoenix is in a similar boat.
Nearly 700 colleges across the nation have a rate of nonrepayment of over 50 percent, and yet nearly all of them are still eligible for financial aid through the federal government. The colleges with the lowest rates of student loan repayment include a number of public and private for-profit and not-for-profit institutions, including several historically black colleges. (In fact, research has found that student loan defaults are largely concentrated amongst racially and economically marginalized students. This is perhaps just one piece of evidence showing the cycle of economic inequality certain racial groups face when it comes to education.)
The data shows that this system is in no way sustainable, and could have a huge impact on our country’s economy. Hopefully this data will convince Congress to revisit the broken student loan system and find some sort of lasting solution that will help people find a solution to their debt.
Don’t Let Yourself Be Overwhelmed By Student Loan Debt: Call Atlas Consumer Law Today!
Atlas Consumer Law has decades of experience helping people find solutions to their student loan debt troubles. If you are struggling to repay student loan debt, we are here to help you come up with a way to manage what you owe that best fits your needs. Contact a Chicago consumer lawyer from our firm to discuss your case during a case evaluation: (312) 313-1613.