There's a good chance college graduates will still be more than $20,000 in student loan debt by the time they reach the age of 45.
Four-in-ten adults above the age of 35 who took out student loans are still paying them off, according to findings in a new survey conducted by Harris Interactive on behalf of CouponCabin. Nearly half of adults ages 35-44, 47 percent, said they have outstanding student loan debt above $20,000, with 34 percent of adults ages 45-54 saying they have $20,000 or more left on the balance they owe.
With that much trouble trying to pay off college loans, it's no wonder half of all adults wish they studied something in college with more earning potential, according to the survey.
Young adults between 18-34 also feel the pinch. Of these respondents, 83 percent are carrying a balance. Some 16 percent say they still owe over $40,000.
According to the Project on Student Debt, two-thirds of college graduates in 2010 took out student loans to pay for school, with an average debt of $25,250.
State governments have scaled back their financial support for public colleges by more than a third nationwide, between 1991 and 2008. And as states have chopped away at appropriations for their universities and cut need-based grant aid for students, the Government Accountability Office has found both public and private schools are becoming increasingly reliant on what students pay in tuition for funding.
Pell grants are the financial aid packages given to low-income college students which they do not have to pay back. Students who receive them are not required to attend a public college or even stay in their homestate, so that freedom has made it a fairly popular program. However, Rep. Paul Ryan's <a href="http://www.huffingtonpost.com/2012/03/27/pell-grants-paul-ryan-budget_n_1383178.html" target="_hplink">proposed federal budget would cut $200 million</a> from the program, and potentially eliminate help for more than 1 million students. Currently the maximum Pell grant award is $5,645, which only covers about a third of the cost of attending college. Ryan's budget would cut Pell grant eligibility for students who attend classes on less than halftime. His budget would also make it so college students with federal student loans would have to start paying interest on their loans while still in school.
Thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, virtually no student loans can be discharged in bankruptcy. So in practical terms, if you have $200,000 in debt for credit cards, car payments, or mortgage payments from a private bank, they can all be wiped away in bankruptcy. However, student loans from the same private lender cannot. The argument is that you can take away someone's car when they file bankruptcy, but you cannot take away their education. The Senate <a href="http://www.usnews.com/education/blogs/student-loan-ranger/2012/03/28/looming-student-debt-crisis-hits-the-senate" target="_hplink">heard testimony</a> on March 20 about whether or not this should be changed. Sen. Dick Durbin (D-Ill.) is <a href="http://www.bloomberg.com/news/2012-03-20/durbin-urges-private-student-loans-be-discharged-in-bankruptcy.html" target="_hplink">leading the charge for bankruptcy reform</a> that would allow students to get rid of their student loan debt when and if they file bankruptcy.
<a href="http://www.huffingtonpost.com/2012/04/10/student-loan-forgiveness-act-2012-hansen-clarke_n_1415910.html" target="_hplink">HuffPost Detroit reported</a> on the Student Loan Forgiveness Act, put forward by Rep. Hansen Clarke (D-Mich.): <blockquote>H.R. 4170 would forgive student loan debt for those who have paid 10 percent of their discretionary income toward their loans for 10 years and would cap interest on federal student loans at the current rate of 3.4 percent. Individuals who go into teaching, public service or practice medicine in underserved areas would have their debt forgiven after only five years. "Everyone tells us to go to school and work hard and we'll be rewarded for our dedication," Clarke said. "But the promise of a dream can turn into a nightmare for so many people."</blockquote>
An <a href="http://signon.org/sign/support-the-student-loan" target="_hplink">online petition</a> hosted by MoveOn.org has nearly reached its goal of attaining 875,000 signatures in support of the Student Loan Forgiveness Act. The Forgiveness Act would allow students who make payments equal to 10% of their discretionary income for 10 years to have their remaining federal student loan debt forgiven. According to talking points included in the petition, "If you have already been making payments on your student loans, your repayment period would likely be shorter than 10 years. The amount you have already paid on your student loans over the past decade would be credited toward meeting the requirement for forgiveness."
A 2007 law that kept federally subsidized Stafford loan interest rates low will expire this summer, <a href="http://www.huffingtonpost.com/2012/03/21/student-loan-interest-rate_n_1371236.html" target="_hplink">meaning the rates would double</a> from 3.4 to 6.8 percent. Students have already gone to Capitol Hill to protest and most Democrats are in favor of keeping the interest rates low. Sen. Jack Reed (D-R.I.) and Rep. Joe Courtney (D-Conn.) proposed a bill that would get rid of the expiration date on the discounted student loan rate. However, Republicans argue it would cost the federal government $5.7 billion, which they say is way too much. If Congress does not act, the interest rates for federal student loans would increase on June 30, 2012.
Republicans passed a bill out of committee that would repeal minimum standards for a credit hour and removes the need for a state to authorize higher education institutions in their state. Rep. Virginia Foxx (R-N.C.) <a href="http://edworkforce.house.gov/News/DocumentSingle.aspx?DocumentID=281565" target="_hplink">contends this would allow</a> greater flexibility for schools, Democrats counter that it opens the door for fraud. The federal definition of a <a href="http://democrats.edworkforce.house.gov/blog/overturning-accountability-and-integrity-measures-higher-education-programs-facts-hr-2117" target="_hplink">credit hour is the basic unit</a> underlying the distribution of federal student aid. Rep. Tim Bishop (D-N.Y.) <a href="http://www.insidehighered.com/views/2012/03/15/essay-argues-against-bill-overturn-us-rules-higher-ed-oversight#ixzz1qXWVjWPA" target="_hplink">wrote on Inside Higher Ed</a> that the bill represents a threat to the government's ability to police institutional fraud in the higher education industry. In regards to eliminating the requirement for state authorization for colleges, Bishop said "the bill would make it impossible for states to guarantee the quality of programs operating inside their borders."
A rule from the Obama administration <a href="http://www.wtva.com/news/local/story/Longtime-students-may-be-shocked-at-new-law/nDgQP5Yu9ES5KSkIJJYXiw.cspx" target="_hplink">will limit the use</a> of Pell grants to 12 full-time semesters, or approximately six years of studying. The new rule goes into effect July 1, and the Department of Education will contact students in April who have used up their allotted time in school.
Congressional Republicans <a href="http://www.businessweek.com/news/2012-03-28/republicans-call-for-congressional-probe-of-student-loan-program" target="_hplink">recently sent a letter</a> to the Government Accountability Office urging them to investigate the federal student loan program and whether they are "appropriately managing student debt." The federal government has turned to private debt collectors to collect money owed for student loans, while $67 billion of student loans are now in default, according to Businessweek. Those contractors out there trying to get students and graduates to pay up are paid on commission. The GOP <a href="http://edworkforce.house.gov/UploadedFiles/03-27-12_-_GAO_Letter_on_FFEL.pdf" target="_hplink">letter said</a> they were concerned borrowers who have defaulted are not getting adequate assistance to get back on track repaying their loans. The letter was signed by Rep. John Kline of Minnesota, chair of the House education committee; Sen. Michael Enzi of Wyoming, the ranking member of the Senate education committee; Reps. Virginia Foxx of North Carolina and Judy Biggert of Illinois; and Sens. Lamar Alexander of Tennessee and Tom Coburn of Oklahoma
The newly created Consumer Financial Protection Bureau said it will <a href="http://www.huffingtonpost.com/2012/03/05/student-loan-complaints-cfpb_n_1322037.html" target="_hplink">field complaints</a> about billing, confusing advertising and collection by private student lenders, and relay complaints about federal loans. "Getting a higher education can mean taking on significant debt - a big decision with a lot of consequences," said CFPB Director Richard Cordray. It's safe to say the CFPB is pretty concerned about student debt among American college students. Rohit Chopra, the student loan ombudsman for the CFPB, had a grim forecast recently in a <a href="http://www.huffingtonpost.com/2012/03/22/student-loan-interest-rate_n_1372506.html" target="_hplink">blog post about student debt</a>: "Students continue to borrow private student loans, which lack the income-based repayment and deferment options of federal student loans. If current trends continue, there will be consequences not just for young people, but for all of us."