Student debt is a form of debt that is owed by an attending, withdrawn, or graduated student to a lending institution. The lending is often of a student loan, but debts may be owed to the school if the student has dropped classes and withdrawn from the school. Withdrawing from a school, especially if a low- or no-income student has withdrawn with a failing grade, could deprive the student of the ability of further attendance by disqualifying the student of necessary financial aid. Student loans also differ in many countries in the strict laws regulating renegotiating and bankruptcy. Due payments may be a retroactive penalty for services rendered by the school to the individual, including room and board.
As with most other types of debt, student debt may be considered defaulted after a given period of non-response to requests by the school or the lender for information, payment or negotiation. At that point, the debt is turned over to a Student Loan Guarantor or a collection agency.
In the United States of America, the “Congress created a rule called the ‘Cohort Default rate’. Annually the Department of Education evaluates the proportions of students who have received student loans and have withdrawn from a college, and have a defaulted on their federal government backed loans.†If that nonpayment (default) rate is too high, the college will be refused the privilege of having government financial aid available to their students. According to Adam Looney, and Constantine Yannelis with the Brookings Papers on Economic Activity, in 2011, “borrowers at for-profit and 2-year institutions represented almost half of student-loan borrowers leaving school and starting to repay loans, and accounted for 70 percent of student loan defaults." This rule was an instantaneous achievement, ‘there were more than fifteen hundred for profit colleges were pushed out of the system’. Colleges have to change their funding habits to get in line with the government guidelines. Many colleges are continuously forced to lower their nonpayment rates, down.†The number of defaulters has not changed, it is just the way the government tracks them.
History
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Many factors are accountable for student debt. The growing problem of student debt has become more prominent in the futrure decade, inspiring numerous documentaries that examine the causes and effects. One factor is due to the new guidelines developed by the federal government. There are now new rules deciding who can borrow, as well as how much debt they can take on. Colleges and universities have been increasing the costs for students to attend their schools subsequently increasing the amount of debt these students take on as student loans. Reports have shown that borrowers who finished college in the early 1990s were able to maintain managing their student loans without an enormous burden. The average debt has increased 58% since over the past seven years. The debt for students in the United States has risen from $17,233 in 2005 to $27,253 in 2012. Some blame the economy for the debt increases, but in the same 7-year period credit card debt and auto debt have decreased. According to the Student Debt Crisis, within the past three decades the cost of attaining a college degree has drastically increased by more than 1,000 percent. If student debt had stayed constant with inflation since 1992, graduates would not be facing such burdens by student loans.
Statistics
United States
The Economist reported in June 2014 that U.S. student loan debt exceeded $1.2 trillion, with over 7 million debtors in default. In 2014, there was approximately $1.3 trillion of outstanding student loan debt in the U.S. that affected 44 million borrowers who had an average outstanding loan balance of $37,172.
Public universities increased their fees by a total of 27% over the five years ending in 2012, or 20% adjusted for inflation. Public university students paid an average of almost $8,400 annually for in-state tuition, with out-of-state students paying more than $19,000. For two decades ending in 2012, college costs rose 1.6% more than inflation each year. Government funding per student fell 27% between 2007 and 2012. Student enrollments rose from 15.2 million in 1999 to 20.4 million in 2011, but fell 2% in 2012. Bloomberg reported in July 2014 that: "The biggest growth in the program came in the past decade, as student debt rose an average of 14 percent a year, to $966 billion in 2012 from $364 billion in 2004, according to New York Fed data."
There were around 37 million student loan borrowers with outstanding student loans in 2013. According to the Federal Reserve Bank of New York, outstanding student loan debt in the United States lies between $902 Billion and $1 Trillion with around $864 Billion in Federal student loan debt. As of Quarter 1 in 2012, the average student loan balance for all age groups is $24,301. About one-quarter of borrowers owe more than $28,000; 10% of borrowers owe more than $54,000; 3% owe more than $100,000; and less than 1%, or 167,000 people, owe more than $200,000. Of the 37 million borrowers who have outstanding student loan balances, 14%, or about 5.4 million borrowers, have at least one past due student loan account. For every student loan borrower who defaults, at least two more borrowers become delinquent without default. In 2010 for the first time ever, student loan debt exceeded credit card debt and in 2011 student debt surpassed auto loans (both of which were decreasing). According to Mark Kantrowitz, publisher of FinAid.org, student loan debt is growing by $3,000 per second. According to a report by The Institute for College Access and Success the average debt from those who graduated in 2013 topped $30,000 in six states and was only below $20,000 in one state. Data released by the Federal Reserve Bank of New York showed that in the fourth quarter of 2014 delinquency rates for students dipped to the point where approximately one in nine student loans is past due. As of 2015 over half of outstanding student loans are in deferral, delinquency or default. Rising student loan debt is exacerbating wealth inequality.
Student loan borrowers that attended a for profit, and two year community colleges, in comparison, earn low annual salaries; an average of $22,000 for people withdrawing from schools as of 2010. This means that these people have troubles paying back their loans. The new evidence is reliable with the previous data. For example, the statistics presenting that default rates are essentially lower within the demographic of borrowers with large loans than within borrowers with small loans. However, the new evidence which goes back twenty years, shows how much the scenery of borrowing has changed. currently, most borrowers are older and attended a for profit or two year community college. about ten years ago, the standard borrower was an established student at a four-year university.
In recent years, tuition has been rising due to the cuts of government funding in education. As an example, more specifically, the University of Pittsburgh has had an increase in tuition of 3.9 percent for the academic school year of 2014-15. In recent weeks, the U.S. Department of Education ranked Pitt as the most expensive public university for tuition and fees, just ahead of Penn State University, which this past year totaled $16,240 in the arts and science school.
In 2005, the difference in median annual income between those with a bachelor's degree vs. those with a high school diploma was $16,638, though this varies considerably by field of study.
Canada
Canadians have been experiencing the rapid accumulation of student loans as well. As of September 2012, the average debt for a Canadian leaving University was 28,000 Canadian dollars, and that accumulated debt takes an average of 14 years to fully repay based on an average starting salary of $39,523. As a nation, Canadians have accumulated more than $15 billion of student loan debt, while Canadians continue to fight to protect their tuition rates from further skyrocketing.
United Kingdom
There is concern about the level of student debt in the United Kingdom. There is also concern about possible changes in government policy forcing graduates to pay back more. Andrew Adonis claims most student loans will never be repaid, Adonis also maintains university leaders have failed to improve teaching standards but rewarded themselves handsomely with high salaries. The Institute for Fiscal Studies maintains three quarters of graduates will never repay all their debts. Andrew McGettigan, loans system expert said, “Until the government removes their right to retrospectively change terms, then you as a borrower appear to be on the hook to future policy changes. Sebastian Burnside NatWest economist, said student debt was rising faster than all other types of debt, he said, “These latest figures show student debt is becoming of greater priority with every passing year. Student debt is the fastest growing type of borrowing and is rapidly becoming economically significant.â€
Social and political reactions
The growing problem of student debt has caused many reactions from young people throughout the United States. As a result, the Occupy Colleges and Occupy Student Debt movements merged in 2012 in an effort to gain support from students around the country. There have been significant efforts made via social media for the Occupy Student Debt campaign. In particular, students all over the United States have posted their personal student debt testimonies. While some success stories of students eliminating debt have been reported on, they are met with heavy skepticism. Since last October, Occupy Student Debt has provided a platform for over 800 students to share their horror stories. Because of this, other organizations such as, Rebuild the Dream, Education Trust, and the Young Invincibles, have joined in the effort and started similar platforms. The Occupy College movement itself has staged over 10 direct actions. They have also gathered over 31,000 signatures on the White House’s petition site, “We the Peopleâ€. As a result, President Obama announced the Pay as you Earn initiative. Another petition, titled 'Support the Student Loan Forgiveness Act of 2012' on MoveOn.org, which seeks similar relief for student borrowers, has gotten over one million signatures. HR 4170: “The Student Loan Forgiveness Act of 2012†would give relief to borrowers with both federal and private student loans. HR 4170 also includes the “10-10†programs, which allows borrowers to pay 10% of their discretionary income for ten years with the remaining balance forgiven afterwards.
In April 2012, student loan debt reached US$1 trillion. Severity of the student debt burden represents such a threat to the middle class that some have demanded a general bailout. Anthropologist David Graeber, author of Debt: The First 5000 Years, argues that student debt is "destroying the imagination of youth":
If there’s a way of a society committing mass suicide, what better way than to take all the youngest, most energetic, creative, joyous people in your society and saddle them with, like $50,000 of debt so they have to be slaves? There goes your music. There goes your culture. There goes everything new that would pop out. And in a way, this is what’s happened to our society. We’re a society that has lost any ability to incorporate the interesting, creative and eccentric people.
In 2014, a Chilean activist, artist Francisco Tapia, known as "Papas Fritas" (French Fries) "burned $500 million worth of debt papers" from Viña del Mar University, and displayed the ashes in a van as an art project. "The University was being shut down due to financial irregularities. 'It is a concrete fact that the papers were burned. They are gone, burned completely, and there’s no debt,' said Papas Fritas in his first U.S. broadcast interview. 'Since these papers don’t exist anymore, there’s no way to charge the students.'
On November 12, 2015, students organized rallies at more than 100 college campuses across the United States to protest crippling student loan debt and to advocate for tuition-free higher education at public colleges and universities. The demonstrations took place just days after fast food workers went on strike for a minimum wage of $15 an hour and union rights.
In 2015, Central Saint Martins student Brooke Purvis announced that he would burn his student loan as a form of protest art, raising awareness about student debt. It is argued the art work addresses the subject matter of the materialism of money and brings to light the political issues of the U.K student loan system.
Leon Botstein, president of Bard College in Annandale-on-Hudson, N.Y., contends that the next president elected in 2016 should push for all outstanding student loan debt to be forgiven.
A February 2018 research paper from the Levy Economics Institute of Bard College argues that government cancellation student debt in the United States would result in rising consumer demand, along with economic growth and increased employment. Over the following decade, the GDP would increase by between $86 billion and $108 billion annually, which would result in an increase of between 1.2 and 1.5 million jobs and a decreased unemployment rate of 0.22 to 0.36 percent.
See also
- College admissions in the United States
- College tuition in the United States
- EdFund
- Free education
- Higher education bubble in the United States
- Higher Education Price Index
- Post-secondary education
- Private university
- Student benefit
- Student loan
- Student loans in the United States
- Tuition
- Tuition agency
- Tuition center
- Tuition fees
- Tuition freeze
External links
- "Aging With Student Debt" Well-known Student Loan Advocacy group
- Bloomberg "Student Debt" (July 2014)
- Federal Reserve Bank of NY - U.S. Student Loan Debt Presentation from February 2013
- Federal Reserve Bank of NY - U.S. Student Loan Debt Statistics
- Federal Reserve Economic Data - FRED - "Student Loans Owned and Securitized, Outstanding"
- "Forgive Student Loan Debt" Well-known Student Loan Advocacy site
- "Get Out Of Debt" Informational site addressing College Debt, as well as other types of debt
- "Occupy Student Debt" Students' reactions: Accounts of debtor stories
- "Project On Student Debt" at the Institute for College Access & Success
- "Student Debt Relief" at Equal Justice Works
- "Student Debt Crisis" at Student Debt Crisis is a non-profit (501c4) organization dedicated to fundamentally reforming student debt and higher education loan policies
- "Student Loan Justice" Well-known Student Loan Advocacy site
- "Student Loan Ranger" at Equal Justice Works
- "Student Loan Ranger" at U.S. News
- "The Law School Tuition Bubble" (Research & commentary on the Law School Tuition Bubble)
- "Thirst For Justice" Higher-Ed Tuition Costs (A well-sourced advocacy Position Paper)
- U.S. Department of Education Federal Government program, whose states mission in "About ED" section is "to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access."
- "U.S. PIRG" Public Interest Research Group
- Germany Makes College Education Free as American Students Drown in Debt. Truthdig, October 4, 2014.
- A Student-Debt Revolt Begins. The New Yorker. February 23, 2015.
- Debt Dodgers: Meet the Americans Who Moved to Europe and Went AWOL on Their Student Loans. Vice, January 17, 2016.
References
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