UNDERSTANDING THE STUDENT LOAN DEBT STUDENTS ACCUMULATE IN COLLEGE

Wendy M. Knight

Graduate Research Day

May 2, 2014

DISCUSSION POINTS

Purpose Significance Findings Importance in Higher Education Implications for Student Affairs Professionals Recommendations Conclusion

PURPOSE The purpose of this study was to understand

the student loan debt students accumulate in college

SIGNIFICANCE To aid student affairs professionals in

understanding the student loan debt students accumulate while in college

To give understanding to student affairs professionals the current interest rates on the student loans, payback options, and the effect on graduating seniors and job searches

To find ways to address and potentially avoid the student loan debt issue

FINDINGS The total amount of student loans

outstanding was over $800 BILLION dollars $300 billion was acquired between 2006 –

2010 Interest rates are between 4.5% - 6.8% Average student loan debt (as of 2010) was

between $20,000 to $150,000 First year undergraduate eligibility $3,500 - $9,500 Second year undergraduate eligibility $4,500 - $10,500 Third year and beyond undergraduate eligibility $5,500 -

$12,500 Graduate or professional studies $20,500

National default rate was over 8% Department of Education offers four

repayment plans; standard, extended, graduated, and income-contingent

The rising cost of tuition and the decrease in grant funding is increasing the amount of loans students are taking out

College graduates are not finding employment, or taking a mismatched job

More college graduates are moving back home after graduation

More students are struggling to make their monthly payments and are either applying for a forbearance or going into default

College graduates are being taken out of the purchasing market because of high student loan debt

IMPORTANCE IN HIGHER EDUCATION

A high default rate at an institution can result in loss of federal funding

The value of education vs. the loan debt Access to higher education seems impossible

to some based on high tuition and fee rates Less degree seeking students may have a

long term effect on job market and the economy

IMPLICATIONS FOR STUDENT AFFAIRS PROFESSIONALS Decreased retention rates Value of education questioned Dealing with the student in shock of the

amount of student loans acquired while attending college

The higher stress level of a student who is aware of the debt he or she has accumulated

RECOMMENDATIONS Each college/university or lending institution

should have a specialized office on campus which deals with student loans, past and present

Mandated yearly meetings with the students so they are aware of their current balances owed – being updated on what expected monthly payment will be

Mandate financial literacy classes to students, at least once a year as informative or refresher

CONCLUSION Current loan debt is a burden to students

leaving college, either by graduating or not Most students are unaware of their student

loan debt until they leave school Without a specially designated office with

knowledgeable staff students will not have a place to go to get their questions answered

The rising cost of tuition and fees is making access to higher education almost beyond reach

REFERENCES

Gast, S., & Glickman, J. (2011, September 12). Default Rates Rise for Federal Student Loans. Retrieved December 3, 2011, from ED.gov: http://www.ed.gov

Historical Interest Rates. (2011). Retrieved December 3, 2011, from FinAid! The SmartStudent Guide to Financial Aid: http://www.finaid.org/

History of Student Financial Aid. (2011). Retrieved December 3, 2011, from FinAid The SmartStudent Guide to Financial Aid: http://finaid.org

Hobijn, B., Gardiner, C., & Wiles, T. (2011, March 21). Federal Reserve Bank of San Francisco. Retrieved December 3, 2011, from FRBSF Economic Letter: http://frbsf.org

Kamenetz, A. (2010, August 11). Huff Post College. Retrieved December 3, 2011, from Huffingtonpost.com: http://www.huffingtonpost.com/anya-kamenetz/830-billion-in-student-lo_b_679497.html

Khalfani-Cox, L. (2011, April 14). Student Loan Repayment Options for Federal and Private Loans. Retrieved December 3, 2011, from Daily Finance: http://www.dailyfinance.com

REFERENCES CONTINUED

Lucas, D., & Moore, D. (2007). Guaranteed vs. Direct Lending: The Case of Student Loans. Measuring and Managing Federal Financial Risk, (p. 43). Evanston.

Not Just for the Elite A History of College Student Loans in America. (2008, March 15). Retrieved December 3, 2011, from Random History: http://www.randomhistory.com

Occupational Outlook Handbook, 2010-2011 Edition. (2010, December 3). Retrieved December 3, 2011, from United States Department of Labor, Bureau of Labor Statistics : http://www.bls.gov

Special Direct Consolidation Loans. (2011, November 16). Retrieved December 3, 2011, from Student Aid on the Web: http://studentaid.ed.gov

The History of Student Loans – Financial Aid for Economic Competition. (2011). Retrieved December 3, 2011, from Financial Shopper Network: http://financial-shopper-network.com

Toby, J. (2009). Using Carrots and Sticks to Improve American Colleges. Social Science and Public Policy , 42-47.