Yesterday, the New York Times reported that college students in the class of 2010 now owe an average of $25,250 – up 5% from last year. Apparently, this is a new record, and is coupled with a 9.1% unemployment rate for new college graduates – also the highest in recent years. Mark Kantrowitz, publisher of Finaid.org and Fastweb.com, predicts that the class of 2011 will face an average debt of $27,200.
Oh, the places we will go…
The New York Times reports today that aggressive lobbying by top student lenders like Sallie Mae may derail Obama’s plans for reforming the student loan industry.
Obama’s plan is to cut out federal subsidies to private lenders and loan the money directly to students instead, a plan that a Congressional Budget Office analysis says could save approximately $80 billion dollars over the next ten years. That money would then go to “expanding direct Pell Grants to students, establishing $10,000 tax credits for families with loans, and forgiving debts eventually for students who go into public service, administration officials say.”
Myself a law grad with crippling student loan debt, I was particularly excited to discover the new-ish blog, Big Debt, Small Law. The blog is written by a graduate of Seton Hall University School of Law who is, to put it mildly, extremely angry about the career/salary prospects for law school graduates from non-top-ranked schools in comparison to tuition costs. From the About page:
Today’s law school deans are the modern day “Wizards of Oz.” They know full well (perhaps better than anyone) the gruesome market and long-shot odds that their grads will soon face, yet allow personal greed to trump all tenets of honesty and fair disclosure. And no, you can’t get away with blaming the “recession” for the struggles of your grads. Not here. We graduated in 2005, at the zenith of American economic hegemony, and faced a market not significantly different from what exists today. The truth is this: Small firms in most US markets pay south of 50 K, offer minimal (if any) health benefits, and provide baptism by fire “training” at the expense of clients who can ill afford it.
The National Center for Public Policy and Higher Education has released its latest report on the cost of a college education, and the results, unsurprisingly, are grim. According to the New York Times, the report notes that tuition has risen 439% since 1982 while family income has only increased by 147%. Additionally, “Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.” The article notes that poorer families are being hit especially hard:
The report, “Measuring Up 2008,” is one of the few to compare net college costs — that is, a year’s tuition, fees, room and board, minus financial aid — against median family income. Those findings are stark. Last year, the net cost at a four-year public university amounted to 28 percent of the median family income, while a four-year private university cost 76 percent of the median family income.
The share of income required to pay for college, even with financial aid, has been growing especially fast for lower-income families, the report found.
Among the poorest families — those with incomes in the lowest 20 percent — the net cost of a year at a public university was 55 percent of median income, up from 39 percent in 1999-2000. At community colleges, long seen as a safety net, that cost was 49 percent of the poorest families’ median income last year, up from 40 percent in 1999-2000.
Read the full report here.
The New York Times reports that bankruptcies rose nearly 8% between September and October, due to the ongoing economic crisis, particularly dropping home values and the credit crunch. Over 100,000 filings were made in October, the first time the number has gotten that high since the new, harsher bankruptcy law was passed in 2005. Additionally, people filing for bankruptcy have more debt than in past years:
A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debts, like mortgages and car loans, and about 44 percent more in unsecured debts, like credit cards and medical and utility bills, than filers in 2001.
I was struck that this article didn’t mention student loans at all or the fact that it is nearly impossible to clear them in bankruptcy. The people interviewed certainly had sympathetic stories – homes lost to foreclosure, medical bills, etc., but I wondered about the other people out there – those who are having some of the same issues and can’t get relief through bankruptcy. How are they going to survive?
The Department of Education is going to buy up more student loans from private lenders in an effort to bolster the private student loan market, the New York Times reports. The move comes as investors shy away from the student loan market in the wake of the economic crisis, and large lenders like Sallie Mae stand to benefit the most:
Sallie Mae and big banks like Citigroup and JPMorgan Chase, which make thousands of government-subsidized student loans each year, stand to benefit the most from the government’s program. But so will dozens of nonprofit student lenders that are caught in the same bind. The government’s action will not resolve all worries about student lending. Student loan borrowers this year are finding it more difficult to obtain private loans, which are not guaranteed by the government and which typically carry higher interest rates and less favorable repayment terms.
Thus, in yet another industry, the government is bailing out the people at the top of the hierarchy and overlooking those at the bottom. Part of me understands this – the fact of the matter is, the way our current system is set up, most students need to borrow, and if the lenders can’t lend, that leaves a lot of people unable to get a college education at all. On the other hand, I feel that their must be some alternative to letting tuition costs creep ever higher and forcing everyone to rely so much on loans that such bailouts become necessary in times of economic distress.
Not even 24 hours ago, I posted on students seeking tuition free colleges in the face of economic turmoil. Now, the New York Times is reporting that the economic crisis is hitting colleges particularly hard and the effects are being felt in layoffs, hiring freezes, postponed construction projects, and tuition increases. The article specifically notes that Tufts University, which currently has a need-blind admissions policy, is reconsidering that position: Read more…