As I was flipping (well, more like clicking) through the New York Times, the title "Student Loan Default Rate Is Continuing to Increase" immediately caught my attention, mainly because of all the college application business going around. Many students of the class of 2011 are probably already thinking about how to pay for the college they will be attending next year, and many students are probably already thinking about taking out a student loan. However, we must be aware that the student loan default rate is increasing. Sure, the default rate is about students who have already taken out loans and were unable to pay the loans back, but there is an impact on future college students.
First, the numbers: The default rate at public colleges has increased from 5.9% to 6%, the rate at private institutions has increased from 3.7% to 4%, and the rate at for-profit institutions has increased from 11% to 11.6%. Amazingly, only 26% of the borrowers are for-profit school students, but that 26% makes up 43% of the defaulters. Many for-profit institutions are imposing debts the students can't afford for "degrees and certificates they cannot use." The median loan debt the students at a for-profit school who are earning an associates degree is $14,000.
How is the government getting involved because of the increasing student loan default rates? The Obama administration has proposed regulations that would protect students from the overly aggressive for-profit schools and only allow eligible students to receive aid. These regulations would impact future students who want to receive a student loan because some students who may be able to receive a loan now may be deemed ineligible because of the regulations. However, the regulations would attempt to prevent students from falling into debt because of their inability to pay the loans back.
One regulation that has been proposed would protect students by "requiring for-profit institutions to prepare students for “gainful employment” or risk losing access to federal student aid."
How effective do you think this proposed regulation would be? What regulations do you think should be put in place to prevent and protect students from falling into debt?
3 comments:
I definitely was not aware of this before. Because I'm personally part of a low income household, I'm well under the curve for financial aid. For the past few years, I thought that colleges have been cutting down on student loans or eliminating them completely.
Years before, going to college is like walking into a casino: walk in with cash and come out with debts. Anyhow, student loans have the most effect on middle income households because the U.S. is very generous to low income students and the rich families can obviously pay. Some of the top tiers schools have raised their income level for financial aid to even $100,000/year. And at most colleges, there is job, paid internship counseling, which can be very helpful.
As a senior, I feel that it is necessary for the government to get involved because money should never again be the reason of why one should choose to not to go to college.
Hearing about this makes me even more now scared to borrow a student loan. Ever since college was on my mind i have always considered a student loan but seeing all of these facts that tell students like me it's going to be hard to get one just makes me yaw away from getting one. The next best thing for a student to do is to just sign up for as many scholarships as possible. Although a student may not get enough money to pay for all of college through scholarships a thousand here and a thousand there really go far with everything you must pay for. Students should just forget student loans and go for the free money that people are throwing at students and they don't have to do anything except maybe write an essay and submit a form unlike paying an outrageous amount of money for a loan.
i want to address the proposal that requires for-profit institutions to prepare students for “gainful employment” or risk losing access to federal student aid.---Personally, i find this proposal totally ridiculous. It goes against individual freedom because students should be free to choose what classes they want, even if it doesnt provide for "gainful employment". As a matter of fact, whose right is it to judge what classes are considered appropriate? I don't think students should be denied financial aid just because they want to persue their own interest.
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