Karl Schneider & Alex Delaney-Gesing
There is an emphasis placed on higher education in this country. Get a college degree and secure a more stable financial future for your family and yourself. The trouble is that 70 percent of those seeking degrees are taking out loans with an increasing interest rate so they may navigate the rising costs of education. Alone, Lorain County Community College’s Direct Lending Loan Volume for 2013-2014 was $15,695,160, according to Dean of Enrollment, Financial and Career Services Stephanie Sutton.
At the end of the third fiscal quarter of 2014, the amount of money outstanding in Direct Loans, Federal Family Education Loans (FFEL) and Perkins Loans totaled $1.1 trillion dollars, according to United States Department of Education. This means that the amount of loans has more than doubled since 2007 when student loan debt reached $516 billion.
So why the dramatic increase in recent years? The amount of unduplicated recipients of these loans has not doubled. In 2007, 28 million students received loans. In Q3 of 2014, 39 million students received loans. There must be some other lurking variable spawning the growing debt crisis facing students today.
From 2003 to 2013 the price index for college tuition grew 79.5 percent, according to the Labor Department. The college tuition price index is nearly double that of the overall consumer price index (CPI) during the same time frame.
In terms of more recent data, the published in-state tuition and fees at public four-year institutions has risen 15.9 percent since the 2011-2012 school year, according to collegeboard.org. Recently, the percent change in growth of tuition has been slowing, yet the amount of debt keeps rising.
For students who have had to borrow federal loans, a period of reprieve is granted to them for six months following their departure or graduation, according to the Association of Community College Trustees (ACCT) website. If they fail to begin repayment for a period of 270 days or approximately nine months, they are categorized as ‘defaulting’ on their student loans.
“I definitely think student debt among students is a problem because we leave college with so much debt,” said Amanda Rigutto, a staff assistant in LCCC’s Career Services department. “I only get six months before I have to start paying it off, and that’s not enough time for me to find a full-time job.”
From a 2008 nationwide study, 38 percent of students graduating with associate degrees from community colleges did so with debt, according to forbes.com. While community colleges are a cheaper way of earning an education, the average debt load of a student at a two-year public institution is still approximately $7,000.
John Burroughs, an LCCC alumni who graduated with his associate’s degree in 1990, knows first hand the price needed to be paid for a solid education. After borrowing $2000 in student loans, he was fortunate enough to not have to take out any further amounts while continuing his studies at two four-year universities. However, inspite of this, he has paid far more than just his initial loan.
“…due to a combination of interest charges, late fees and default, the amount I owed has blossomed to where in 2014 I still owe approximately $9000 (over 4 times what I initially borrowed), despite the fact that I have paid far more than $2000 toward my debt in the past 25 years,” Burroughs said.
After being unable to make loan payments for a number of years, he was later promised a deferment of his fees. However, upon returning to work, Burroughs discovered his debt had increased.
“For a long time, I was making minimum wage and could barely afford to pay the minimum monthly payment of $20 toward my loan. It seemed during that time that most of my money was going toward interest, barely touching the principal,” he said, “Then when I was indisposed and unable to work for several years, the monthly late fees and interest kept accumulating, though I was promised a deferment of said fees…. that promise was not kept.”
A total of 8.5 percent of community college students in the country (totaling nearly 1 million students across 30 states) have no access to federal loans, according to projectonstudentdebt.org. Why? Because those community colleges that choose to not offer federal loans to students do so as a way to avoid ‘student loan defaults’, where students who take out federal loans do not pay them back.
Community colleges giving out substantial amounts of federal loans can lose their eligibility to provide grants and loans if too many students default. As a result of this consequence, community college students who are not allowed federal loans end up further in debt as they continue their education.
Another factor that may be contributing to the rise in student debt are Pell Grants, the largest federal grant program available to undergraduate students, as the National Center for Education Statistics states. The Pell Grant program has been in decline since 2009, according to the Congressional Budget Office (CBO). The CBO shows almost a 20 percent decrease in the number and amount of Pell Grants awarded in the past five years. The decrease in Pell Grants forces student to pay more of their tuition out-of-pocket, which equates into more students seeking loans.
Years after taking out a small loan to pay for the expense of college, Burroughs’ advice to current and future college students is simple:
“Do not take a student loan at all if you can avoid it,” Burroughs said. “Other bad loans can be disposed of in bankruptcy or removed from your credit report after seven years of inactivity, but not student loans. They stay with you forever, like secondhand smoke.”
Avoiding debt by relying on scholarships, Pell Grants, federal loans and any other form of financial aid available is a luxury not all students can count on today.
With rising college tuition (not to mention the rising costs of books and supplies), an economy still rocky from the recession, increasing interest rates on federal student loans and a decrease in awarded grant money, it’s no wonder why students are taking on greater burdens of debt. After all, we need to attend college to help us secure a more financially stable future.