Student loan crisis: causes and solutions
Student loans have been part of the college financing mix for a long time.
The detail that is getting so much attention in the national headlines and social media is in the staggering amounts of student loans that college students and recent graduates have taken out in recent years.
The public discussion typically focuses on two questions: “How did this happen?” and “What can be done about it?”
Monroe on a Budget special report
That’s why my special report for The Monroe Evening News and Monroe on a Budget for summer 2012 was on the student loan crisis. This is the reader pitch I sent out on our news and social media feeds:
I am working on a special report on student debt for The Monroe Evening News and Monroe on a Budget.
The topics will include how and why today’s college students got caught in a perfect storm of bad financial circumstances, what it will take for them to pay down high loan balances, and what can be done to lessen the debt burden for future students.
If you are a current college student or recent graduate in Monroe County, Mich., or parent whose student is in that demographic, I’d like to hear from you and include your family’s experiences in the news coverage. Contact me, Paula Wethington, at (734) 240-5745 or at email@example.com.
The special report was published in The Monroe Evening News Sunday Aug. 12. Here are the links on our newspaper’s site:
- MonroeNews.com: Student loan debt crisis hits home in Monroe County and Dealing with debt.
On the blog, I combined the package into one post: Special report: Student loan crisis hits home in Monroe County MI.
In the meantime
As I started project, I began this sidebar to link up to related articles from the archives of Monroe on a Budget and various news and research organizations.
I was particularly interested in the Michigan angles. I also was particularly interested in those who were in college or graduated during the recession. Those economic circumstances had a huge impact on how college students paid for their expenses or could pay back student loans.
Another detail I was aware of is that CNN called 2008 “the most competitive year ever for college admissions” with a record number of applicants for fall semester slots. The high school class of 2008 who finished a university degree in four years would have been in the college graduation class of 2012.
I’ve also been watching this situation from the perspective of a parent. My daughter graduated from high school in 2007, earned her bachelor’s degree in 2011, and earned her masters degree in 2013.
These links include discussions on the collapse of the Michigan Promise Grant in 2008, the impact that the recession had on parents’ finances and scholarship funds, the changes that happened to federal student loans in 2010, shifts in the private student loan market in recent years, and the trend of college internships becoming unpaid opportunities rather than money-making ones.
- A bachelor’s degree in three years? It’s possible, but …
- A reader’s frustrations on college aid.
- ABC News: Is your student loan safe?
- AP: Credit crunch has arrived on campus (2008-09 school year)
- AP: The side effects of avoiding college student debt.
- Big changes on college loans for 2010-11.
- “But I’m not paying for my kids’ college expenses. Why do I have to file FAFSA?”
- College aid programs come and go on short notice.
- Dave’s Stupid Tax series: credit cards + college = disaster.
- Detroit News: College students scramble for funds.
- Detroit News: Michigan economic slump opens doors for interns.
- Detroit News: Students criticize new Michigan Promise proposal.
- Diane Rehm show on student loan overhaul.
- College financing 2008-09: rising tuition in Michigan.
- College financing 2008-09: the rules have changed.
- College financing 2008-09: the student loan crisis.
- Four college financial aid myths and realities.
- Fortune: Get an internship or wait tables?
- Freep’s database of students at Michigan schools who take out student loans.
- Freep: For many middle-income families, college is out of reach.
- Freep: Wayne State to cover 800 Promise Grants.
- How to interpret college financial aid offers.
- Michelle Singletary takes on the question: Should parents pay for college?
- Michigan Tuition Grants fizzling out.
- Newsweek: Can you afford to be a summer intern?
- NPR: Credit crisis shakes student loans.
- NYT: College kids who pay money for unpaid internships.
- Part-time jobs are still part of the college money mix.
- Private student loan discussions posted by Consumer Financial Protection Bureau.
- Sandra Block: New rules on the student loans (2010 changeover).
- Unpaid internships getting more scrutiny.
- USA Today: Private student loans edge back into market.
- What’s happening to the scholarship funds?
- When college plans go to plan B.
- When “full time” college class schedules don’t get you graduating on time.
The financial implications of dropping out of college, or even stopping out for a short time with plans to return, need to be considered in any discussion about student loans.
Students pay for or finance their classes at the start of each academic semester. As they do so, they are using up grant or scholarship eligibility and any financial resources that are available from the family. For many students, this process also includes signing loans.
Those who never finish will have no degree to show for their effort, but still need to repay any loans they took out.
Those who return after time away from school sometimes have to repeat classes, choose a different major, or learn that their degree program has changed requirements and they have to backtrack or add more classes. Those extra classes and / or lost credits contribute to the cost of earning the degree.
Here are some of those discussions.
- Attending vs. graduating from college: there is a financial difference.
- Census statistics on starting, but not finishing, college.
- Drop a college class after withdraw date? No refunds, and sometimes a wrecked GPA.
- How much time does it really take to graduate from college? Longer than you think.
- The Michigan College Access Network and its 60 percent goal.
- Why enrolling in college is half the battle for Michigan students.
What’s happening now
These links include national and Michigan headlines about the debt load that students have been graduating with in recent years, the student loan interest rate decision in late June, the job market these students landed into, and the Student Loan Forgiveness Act proposal.
- CNBC: Student loans leave crushing debt.
- Detroit Free Press report: Crushed by College Debt.
- Freep: Student loan debt rose 25 percent in 2009.
- The jobless college graduates of the Great Recession.
- Michigan student loan statistics from the Project on Student Debt.
- Mint.com’s student loan payment infographic.
- NPR: Call me, maybe, when your student loan is paid in full.
- NYT report: Degrees of Debt – a Generation Hobbled by the Cost of College.
- “Overblown” student loan interest rate debate. Yep, Empowered Dollar got that right.
- Students are hitting new Pell Grant lifetime limits with 2012-13 academic year.
- Student Loan Forgiveness Act 2012: Referred to Congressional committee.
- Student loan interest rates are not the problem – the total amount borrowed is.
- Typical Michigan student debt = payment of $306 a month for 10 years.
- Voices in the student debt movement.
- When Social Security is docked to repay student loans.
- WSJ reporting that college debt is hitting the upper middle class.
How to pay it off
Here are some discussions on ways to pay off the student debt, including the loan forgiveness programs:
- College grads seeking out Niagara Falls’ loan forgiveness opportunity.
- The Consumer Financial Protection Bureau’s student loan option checklist.
- GreenPath Debt Solutions 2011 Clients of the Year share their student loan story.
- If failure is not an option, neither is student loan default.
- Kansas offers a partial student loan forgiveness program in rural areas.
- Liz Weston discusses how to handle student debt.
- Lou Gehrig’s baseball to help pay off a medical student’s debt.
- No More Harvard Debt’s experience: Extreme frugality paid off the loans.
- No More Michigan Debt is starting the student loan payment journey.
- Paying the student loans during college years.
- Public Service Loan Forgiveness: It’s a long range plan.
Alternatives to loans
There is a very short window of opportunity each year to find free money through grants and scholarships. I am surprised as to how many stories I’ve heard of students who either neglect the deadlines, or think a $500 scholarship isn’t worth the effort. This link list also includes a discussion on the Section 529 plans:
- College financing 2008-09: Any other ideas?
- College financing 2008-09: Last minute options?
- College financing 2008-09: Where are the scholarships?
- Dave Ramsey: Can you be a student without a loan?
- A decline in use of scholarships? The question is why.
- Dreamkeepers helps community college students with financial emergencies stay in school.
- Getting into college and paying for it: step by step.
- The “How America Pays for College” 2010 report.
- How America Pays for College 2011 report: Families sought out the free money.
- How America Pays for College 2012: Parents pulling back on spending.
- A Section 529 plan plan can stretch college savings – if you start early.
- Understanding the college financial aid letters.
For a more detailed discussion about how and where southeast Michigan students can find scholarships and grants, go to my Cash for College page. Those newspaper and blog articles were timed in conjunction with financial aid and scholarship season for the 2012-13 academic year.
The following articles on this topic were written after the summer 2012 project:
- Don’t even start college unless you have a plan.
- How America Pays for College: Seeking all available funds as parents are tapped out.
- How big of a deal is the interest rate when Direct Student loans have a lifetime limit of $23k?
- Parent PLUS loans harder to get with fall 2011 changes.
- Some parents are taking out life insurance plans as a backup for student loans.
- Michigan college graduates of 2012 owed $28,840 at graduation.
Updated Dec. 4, 2013.