A Nightmare For College Students: Student Loans But No Degree

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When thinking about student loans, the big concern tends to be: Will a paycheck follow the degree I am going after? And will that salary cover daily expenses, as well as monthly education and student loan repayments?

High school graduation celebrations have been winding down, but the application for federal student loans heats up. The real concern should be: Will I accumulate a large debt and no degree?

A recent report on the economic status of United States households provides an interesting glimpse on education and student loans and the main challenges facing households today.

The Federal Reserve study noted that 23 percent of adults still have education debt. In that category alone, approximately 15 percent had such debt for their education; 6 percent had college debt for a partner or spouse; and 6 percent had education debt for their children’s or grandchildren’s education.

Are you totally fed up with forking over interest payments on education debt every month? Or afraid of the approaching student loan repayment deadline? There exists a solution for this issue: education loan consolidation.

Additional and interesting statistics:

  • Those going after higher education who took on student loans but did not complete their degree, are less likely to repay their student debt on time.
  • Approximately 16 percent of college loan beneficiaries who did not complete any certificate or degree failed to make monthly payment when due, this is according to the survey released in late May by the FRB. It jumps to 21 percent for those who without a degree and are no longer pursuing the program for which they had applied.
  • By contrast, 6 percent of beneficiaries who finished an associates degree were delinquent on their education loan repayment each month. The percentage drop down to 4 percent for those who completed their bachelor’s degree.
  • Students who are first from their family to attend college and those who attended private colleges find things very tough.
  • The study also showed that 16 percent of borrowers who attended private colleges report being behind on education loan payments, as compared to 6 percent of college attendees who went to a public college or university.
  • The research noted that those attending private institutions or colleges are likely to be first-generation university students or minority students and are not likely to complete their degrees.

The CFPB has sued some for-profit college chains in the recent past for unethical lending practices.

The common reason given for students dropping out of college is mainly family obligations.

Approximately 38 percent of the respondents who did not complete their study or degree did so due to family woes. Family was a driving force particularly among women. Approximately 43 percent of women who enrolled in a college but drop out gave family duties as the main reason.

But students had several reasons for enrolling in a college or university but not getting a degree.

  • About 27 percent said they did not finish a degree since they wanted to work.
  • Approximately 24 percent said their college was too costly.
  • About 25 percent, were simply not interested continuing college.

Not surprisingly, the research concludes: the main factor causing delinquency is failure by students to complete the degree program for which the loan was originated for.

Kantrowitz Mark, an education debt expert and the deputy president and editor for Edvisors.com, said college students who drop out of university’s are 4 times more likely to default than those who graduate.

Default occurs when you’re delinquent on your federal student loans for 360 days or more. If you default, you will have to pay the whole unpaid balance immediately.

Possibly, a contributing factor is that some higher education students who quit do not attend their exit counseling session, which reviews debt repayment options such as education loan consolidation. Exit counseling, which can be done online, is essential when a student drops out of school or graduates.

Ellis Jackson, an employee of Student Loan Guidance Group and Relief 4 Student Debt, said it is vital for students to realize that being a month late or more on education and student loan payments, can reduce their credit scores significantly and have devastating impact on their financial future.

Scavone Victoria, deputy vice president of Student Services and Enrollment at Walsh College, said loan beneficiaries can utilize income-driven loan repayment options on their education loans. Especially, if they end up leaving a school without a degree or do not obtain employment after graduation.

Williams Keith, the associate director of financial support at the State University of Michigan, said that students often don’t realize their repayment plan and options if they do not take advantage of exit counseling when they leave school without a certificate.

Even if a college student has to drop out due to family obligations, Keith said, they can qualify for some waivers due to their particular economic hardship. The economic hardship deferral program is available for up to 36 months.

Students don’t have to repay their education loan solely on a standard loan repayment plan where the monthly payments are costly. Instead, they should consolidate their student loans through options that are convenient to them and actually affordable.

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