According to recent reports released by the United States Dept. of Education, nationwide student loan default rates are soaring this year.
In the last three years, 10.8 percent of graduates from four-year publicuniversities were unable to pay off their school loans and defaulted on payments.
Additionally, almost 14 percent of students who began repaying their loans in 2008 have since reneged. Jake Stillwell, communications director for the U.S.
Student Association said student loans are considered extremely difficult to discharge in bankruptcy and can often ruin students’ credit ratings when defaulted.
“The cost of college is skyrocketing while at the same time the purchasing power of student aid is decreasing,” Stillwell said. “Students have had to take out loans that — mixed with the high unemployment rate for young people — have resulted in massive defaults.”
Federal Pell Grant awards once covered more than 70 percent of the cost of student fees but account for only about 30 percent of that sum today. The grant can provide $400 to $5,550 in assistance on a need-basis to undergraduate students who have not earned bachelor’s degrees. This issue, coupled with a steady increase in college costs over the last five years, has contributed largely to the problem of growing defaults.
Stillwell said the immediate future looks bleak for students who have defaulted on loans.
“A vast majority of state legislatures are slashing their higher education budgets this year so state financial aid is likely to decrease, which will
probably cause more hikes in the student loan default rate,” Stillwell said. “Republican leaders in the House of Representatives are proposing crippling budget cuts to federal financial aid programs and if these proposals pass, then this trend will probably continue because students will have to take out more private loans.”
USSA President Lindsay McCluskey said state and federal governments should be held accountable for failing to prioritize higher education.
“All states need to value higher education,” McCluskey said. “If we all put pressure on the system, officials will start to invest more time and resources in campuses and this would create more opportunities for everyone.”
The USSA plans to rally in 2011 for an educational budget that prioritizes grants over loans.