A closer look into student loan debt

Aliana Zamorano / Assist. News Director

After graduating, affording school evolves into a new monster of affording loan payments, which stops adults in their early 20s to buy a car or a house.

But depending on a student’s loan debt, that could be the sort of expense a student is looking at and trying to afford, with one of the few assurances being a financial services firm can’t repossess a degree.
A project of the Washington Center for Equitable Growth – founded by John Podesta, former chief of staff to President Bill Clinton and chairman of the Center for American Progress –  maps out student loan default rates along with average income and average loan balance per zip code.
For Kendall 33183, the median household income is $55,153, in Westchester 33165, it is $44,863 and in Hialeah 33018, it is $27,371.

The study found that higher default rates occur in low-income zip codes and affluent zip codes show a higher loan balance, but that tends to be because those people are able to pay back those loans.

“I receive financial aid from FIU to help pay for my education; but I have to take out loans in order to pay the bill in full, which wasn’t an easy choice for me to make,” explained columnist and SJMC student Fabienne Fleurantin in her op-ed “Obama’s Nation: Affordable Education.”

“Trying to pay off loans is a headache I wanted to avoid because I knew it came with repercussions,” she said.
David Wessel, former Wall Street Journal economics editor and director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, broke down the present student loan issue in a video produced by Brookings.
“The bulk of the increased borrowing is by students who went to for-profit and community colleges – a big change from the past,” Wessel said.

“And which students are most likely to default? Those very same students, the ones who went to for-profit schools and community colleges. Twenty-one percent of the borrowers at for-profit schools and community colleges defaulted within two years. But, only eight percent of those at four-year colleges and two percent at graduate schools.”
And it bears out in debt load rankings. For-profit schools rank 1, 2, 4, 5, 6, 7, 9, 10, 11, 16, 19, 20 and 24 on the top 25 colleges where students owed the most in 2014. In 2000, only one school, the University of Phoenix, made the list, which was then made mostly of flagship state public universities.
“Students who went to for-profit schools or community colleges tended to borrow less, but they also tended to come from lower-income families, were less likely to complete their programs and fared much worse in the job market during the Great Recession and the ensuing slow recovery,” Wessel said.
An Equifax statement in June 2015 – the WCEG used data from an Equifax competitor, Experian, in its report – said one of the reasons millennials aren’t buying houses is their loan debt.
“Equifax data suggests that the conventional theory – millennials are the rental generation and uninterested in home ownership – is only a part of the story,” Equifax Deputy Chief Economist Dennis Carlson said.

“Importantly, large amounts of student debt and less than stellar job prospects for recent college graduates make the dream of homeownership shine less brightly than in the past. But we also see indications that they will eventually want the family, the car and the house that older generations desired, just with a significant delay.”

Additional reporting by TNS Staff

[image from flickr]