Other economists believe that President Barack Obama should create a new “national service corps” similar to the GI Bill in the 1950s. People could serve before, during and after college in order to receive tuition, room, board and fees at any public university. Private universities should be willing to offer a tuition break if students serve in the corps. So far, the idea, and many others like it, are just that—ideas.
But for students now entering college, Platt suggests parents and children seriously consider their “return on investment” before signing up for a loan. He says they should ask: Will the education I get be a sufficient return on the investment?
“I suspect in some cases the answer is no,” Platt says. “In those cases, social pressure is pushing kids to go to college who shouldn’t even go to college. College isn’t a simple calculation. There is a lot of uncertainty and unknown.”
According to the ACT report The Condition of College & Career Readiness 2012, 60 percent of high school graduates are at risk of not succeeding in college and careers. Platt says that some students may simply need to learn a trade or pick a career that will still be around in 20 years. That’s because there are thousands, if not millions, of college graduates with mountains of debt who aren’t working in their chosen field. They either decided they didn’t like the work connected to their degree or it vanished because of changing technology.
“Many students really should take a year off to figure out what to do with their lives,” he says.
college graduates are facing their own fiscal cliff when it comes to student loans.
According to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit, outstanding student loan debt in the United States now stands at $956 billion. The report states that more student loan borrowers are currently falling behind on their payments.
Since 2003, student loan debt has been increasing every quarter. Eleven percent of borrowers are now more than 90 days delinquent on their loans, which is higher than “serious delinquency” on credit cards. Unlike mortgages and credit card debt, however, it’s nearly impossible to wipe away college loans with bankruptcy. Instead, students are saddled with thousands of dollars of debt for decades, making it harder to sign a mortgage, save for retirement, and build good credit.
“In these tough times, a college degree is still your best bet for getting a job and decent pay,” said The Institute of College Access & Success President Lauren Asher in a statement. “But, as debt levels rise, fear of loans can prevent students from getting the education they need to succeed. Students and parents need to know that, even at similar looking schools, debt levels can be wildly different. And, if they do need to borrow to get through school, federal student loans, with options like income-based repayment, are the safest way to go.”
Earlier this month, the U.S. Department of Education issued final regulations aimed at helping federal student loan borrowers lower their monthly payments and avoid default. The “Pay-As-You-Earn” repayment plan gives additional repayment relief to recent graduates by tying their monthly payments to their income. Loan forgiveness under this plan now occurs after 20 rather than 25 years of payment.
Still, that’s only for federal loans taken out between September 30, 2007 and at least one after September 30, 2011.
According to The Institute of College Access & Success, two-thirds of college seniors who graduated in 2011 had student loan debt, with an average of $26,600 per borrower. Students who attended college in the Northeast and Midwest faced the highest debt, with New Hampshire leading the 50 states at an average debt of $32,450 per student. Utah and Hawaii had the lowest and second lowest average debt at $17,250 and $17,450.
Mike Halterman, 27, attended the University of South Florida in Tampa and earned an associate’s degree before stopping short of a bachelor’s degree. Halterman has a Stafford loan and $11,000 in debt. He was once close to defaulting and had to go through a nine-month punitive payment session before his loans would be considered in good standing again. He has no clue how he will pay the loan back.