As the Great Recession continues to drag unmercifully onward millions of Americans have fallen victim to the prolonged economic uncertainty, but one segment of society whose pain has gone relatively unnoticed are college students and recent graduates. With the burden of interest bearing student loans continually looming in the background, many recent college graduates and current students are confronting a weakened job market in which entry level positions simply no longer exist. With little or no income upon graduation, a higher number of American students and graduates are defaulting on their college loans than ever before. According to recently released data compiled by the United States Department of Education nearly 9% of borrowers defaulted overall during the last fiscal year, which represents a significant increase from the 7% default rate seen just last year. Rising unemployment has consistently been found to be linked to the sharp rise in student loan default rates, and until the issue of job creation is sufficiently addressed by Washington we can expect more of our students to buckle under the weight of unsustainable debt.
Studies conducted by the Department of Education have indicated that as many as 15% of student loan borrowers defaulted on their loans in the first two years of repayment. This figure presents a startling rise from the 11.6% default rate of last year and is symptomatic of an ailing American economy which has been slow to recover from a prolonged recession. Recent research conducted by the Institute for Higher Education has revealed that two borrowers fall behind in their student loan payments for each one who defaults. This data suggests that even those recent graduates fortunate enough to secure employment are having trouble making ends meet and affording their monthly repayment schedules. With tuitions and other costs associated with higher education rising every year, students are also borrowing at increasingly high rates simply in order to attend school in the first place, and it is these students who have found themselves unable to repay their loans upon entering a diminished job market.
One of the fastest growing sectors of the education industry is the for-profit university market, and not surprisingly, these convenience based institutions with lax acceptance policies have produced the highest number of students who default on their loans. It has been found that for-profit colleges, which are typically offer online curriculums catering to working adults and low income individuals, enroll just 10% of America’s undergraduate population, while their students comprise over half of the nation’s student loan defaults. Students and recent graduates who find themselves strapped with loans they can’t pay back often find themselves caught in a vicious cycle, taking out high-interest payday loans simply to afford their student loan bills. Eventually this house of cards collapses and the ambitious student is forced to default, abandoning any dreams they had of quickly parlaying education into success. If America hopes to recover from the current recession, remedying the student loan crisis is an essential first step in that process.