!-- 12/21/06 -- This week's diary by Eugene! Thanks, Eugene! --!
Last week we had our first Kossacks Under Thirty Five conversation. As the poll results show, the most pressing issue facing our age group is student loan debt. Even the other high-ranking problems (basic costs of living, getting a job, education) are closely related to the burden of paying off student loans. Budgeting an extra $100 to $800 a month for debt payments is prohibitively expensive, especially at the start of our careers.
Tonight, let’s look at some basic statistics about student debt, get updated on a report from the Dept. of Education’s Advisory Committee on Student Financial Assistance, and share some tips for managing our debt.
Let’s start out with some horrifying student debt statistics.
65.6% : Percent of College Graduates with Debt
$19,202 : Average Debt in Stafford and Perkins Loans (Federal loans directly to student)
50% : Nearly Half of Twenty-Somethings Have Stopped Paying Back their Loans
The charts to the right illustrate the inexorable climb of student debt. Note that it's not just confined to private colleges; public university students are suffering as well. Flagship public schools have long been the solution for financially disadvantaged students. However, as federal and state dollars dwindle, public schools are forced to hike up tuition. On average, tuition at public and private schools climbs 10% a year. As the graphics demonstrate, this rise in tuition creates a rise in student debt.
Furthermore, as college costs rise, more and more students are forced to take out loans to complete their educations. While I was unable to find more recently updated charts, these graphs from 2001 show the clear increase in individual debt, and the number of graduates who have debt. Pair that with surging inflation, rising interest rates, falling wages and crappy job prospects, and us under-35's are facing a serious financial crisis. | |
Policy recommendations for student loans come from the Advisory Committee on Student Financial Assistance, part of the Dept. of Education. The Committee is composed of administrators from universities, the loan industry and education groups. Importantly, these are appointment positions from the Senate, House, and Sec. of Education. In other words, all have been appointed by Republican leadership. While the entire committee is hopefully not one giant rubber stamp, it bears mentioning that our new Majority means that now Democrats will appoint the members as each three-year term expires.
At the ACSFA’s national hearing this fall, panelists responded to a report entitled "Mortgaging Our Future: How Financial Barriers to College Undercut America’s Global Competitiveness," which looks at Bachelor’s degrees lost since the 1990’s due to economic factors. The findings are what you might expect:
- Need-based grants are inadequate, and must be increased
- Latino students receive less aid than they should, and are hurt by policies working against aid for transfers from 2- to 4-year colleges.
- Minorities need more aid to attend graduate school, and as such remain under-represented.
- While merit-based aid has increased 240%, need-based aid has increased only 56%. ("Merit-based" is the money colleges throw at kids to convince them to attend. Most of these students are not in dire need.)
- States have experienced a 21% reduction in funding for students.
- Student loan borrowing has increased 61%.
- 25% of students pay for college with a credit card.
If you'd like to contact the members, their information is available at the link above. This group is having another open hearing, in Chicago this December. Windy City Kossacks, you should go and report back for us.
As for all of us student debtors out there, here are some helpful reminders about managing your debt:
- You can WRITE OFF your loan interest on your taxes, up to $2,500, but you have to HAVE PAID that interest within the tax year for it to count. Just accruing does no good.
- When your interest CAPITALIZES, it adds to the principal (what you borrowed) and earns interest of its own. You end up paying interest on your interest. This means you owe more money, and it grows much faster.
- HARDSHIP DEFERRALS are available for those who can’t afford to pay. This helps protect your credit and keeps you from defaulting. Ask your loan provider for more information.
- If you can, pay an extra $5 or $10 a month against the PRINCIPAL of your loan. You may need to call the loan company to make sure it gets credited that way, as opposed to future interest. Paying the principal ahead of time saves you interest in the long run.
Nancy Pelosi has promised to cut student loan interest rates in half. Ostensibly this extends to Federal Loans – no idea on Private loans and consolidated loans with Sallie Mae. We’ll have to wait and see what the legislation says.
Meanwhile, the burden of student debt deters many students from seeking and completing the education they desire. Its lasting impact can force unhappy career decisions, limit professional opportunities, create personal/family problems, and cause significant, serious financial difficulties.
So, let’s talk about our student debt.
Update #2: Tax tips from azindy that you can use now! Thanks, dude.
Update: This diary series was started to increase participation and conversation amongst the younger members here, some of whom don't always speak up as much as they should! Anyone with an interest in the topic is always, always welcome to chime in, but the overall goal is to help grow our future majority. See last week's diary linked above for more info.