College Graduates Sinking Further Into Debt August 24, 2009
Paul Partridge on the long-term cost of college loans.
In recent weeks, new information has come to light on a sadly growing population: unemployed college graduates unable to repay their student loans.
Last week figures were released showing that only about 20% of new college grads were able to find employment in their field of study, which gets right to the heart of the problem.
This is the dirty little secret of the college game. It’s not bad enough that we’re being asked to pony up $200,000 for a college education and only 53% of students graduate within six years (American Enterprise Institute). Now, when our students do graduate, they end up in the poor house because they can’t find a
job.
According to Department of Education estimates, student loan default rates jumped to 6.9% in 2007, from 5.2% in 2006. These days, not being able to repay your college loans is serious business. You can quickly do serious damage to your credit, precisely at the stage in life when you should be building up your credit worthiness. In default, the loan balance becomes due, and the government can garnish your wages and withhold tax refunds.
The college loan debt burden has gotten so bad that a new industry has formed to service this growing market. A company called BridgeSpan Financial from Washington, D.C., is making available a product called SafeStart, which protects borrowers from the risk of defaulting on their loans.
For $40 to $60 per $1,000 of student debt, SafeStart will provide an interest-free line of credit that borrowers can use to repay federal student loans for up to five years after graduation. To access the cash, the graduate must be unemployed or have loan payments that exceed 10% of income. The idea is that once a graduate’s circumstances improve, s/he has up to five years to repay the interest-free SafeStart loan.
Let me get this straight… Despite billion-dollar endowments and a falling economy, colleges and universities continue to raise their tuitions with alacrity. As a result, New Jersey parents and students are being asked to borrow evergrowing amounts to fund a college education. But the chances of you actually graduating and finding a job that pays anything are plunging – so much so that folks are laying out even MORE money as insurance against inevitably defaulting on their exorbitant loans (by the way, the first loan I’m aware of where you’re required to be UNemployed to qualify).
Sheesch.
Is this getting out of control?
