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Student debt

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Student debt

Student debt is a form of debt that is owed by an attending, withdrawn or graduated student to a lending institution. The lending is often of a student loan, but debts may be owed to the school if the student has dropped classes and withdrawn from the school. Withdrawing from a school, especially if a low- or no-income student has withdrawn with a failing grade, could deprive the student of the ability of further attendance by disqualifying the student of necessary financial aid. Student loans also differ in many countries in the strict laws regulating renegotiating and bankruptcy. Due payments may be a retroactive penalty for services rendered by the school to the individual, including room and board.

As with most other types of debt, student debt may be considered defaulted after a given period of non-response to requests by the school and/or the lender for information, payment or negotiation. At that point, the debt is turned over to a Student Loan Guarantor or a collection agency.

History

Many factors are accountable for the drastic increase of student debt. The growing problem of student debt has become more prominent in the past decade, inspiring numerous documentaries that examine the causes and effects. The Fallen American Dream, is a documentary on America’s challenges with college affordability and its declining job market during a time of national crisis and global change.[1] One factor is due to the new guidelines developed by the federal government. There are now new rules deciding who can borrow, as well as how much debt they can take on.[2] Colleges and universities have been increasing the costs for students to attend their respective schools subsequently increasing the amount of debt these students take on as student loans. Reports have shown that borrowers who finished college in the early 1990s were able to maintain managing their student loans without an enormous burden.[2] The average debt has increased 58% since over the past seven years. It has risen from $17,233 in 2005 to $27,253 in the United States.[3] Some blame the economy for the debt increases, but in the same 7 year period credit card debt and auto debt have decreased.[3] According to the Student Debt Crisis, within the past three decades the cost of attaining a college degree has drastically increased by more than 1,000 percent.[4] If student debt had stayed constant with inflation since 1992, graduates would not be facing such burdens by student loans.[2]

Statistics

United States

Distribution of student loan debt in the U.S.

The Economist reported in June 2014 that U.S. student loan debt exceeded $1.2 trillion, with over 7 million debtors in default. Public universities increased their fees by a total of 27% over the five years ending in 2012, or 20% adjusted for inflation. Public university students paid an average of almost $8,400 annually for in-state tuition, with out-of-state students paying more than $19,000. For two decades ending in 2012, college costs rose 1.6% more than inflation each year. Government funding per student fell 27% between 2007 and 2012. Student enrollments rose from 15.2 million in 1999 to 20.4 million in 2011, but fell 2% in 2012.[5][6] Bloomberg reported in July 2014 that: "The biggest growth in the program came in the past decade, as student debt rose an average of 14 percent a year, to $966 billion in 2012 from $364 billion in 2004, according to New York Fed data."[7]

There were around 37 million student loan borrowers with outstanding student loans in 2013. According to the Federal Reserve Bank of New York, outstanding student loan debt in the United States lies between $902 Billion and $1 Trillion with around $864 Billion in Federal student loan debt.[8] As of Quarter 1 in 2012, the average student loan balance for all age groups is $24,301.[8] About one-quarter of borrowers owe more than $28,000; 10% of borrowers owe more than $54,000; 3% owe more than $100,000; and less than 1%, or 167,000 people, owe more than $200,000.[8] Of the 37 million borrowers who have outstanding student loan balances, 14%, or about 5.4 million borrowers, have at least one past due student loan account.[8] For every student loan borrower who defaults, at least two more borrowers become delinquent without default.[8] In 2010 for the first time ever, student loan debt exceeded credit card debt and in 2011 student debt surpassed auto loans.[9] According to Mark Kantrowitz, publisher of FinAid.org, student loan debt is growing by $3,000 per second.[9] Rising student loan debt is exacerbating wealth inequality.[10]

In recent years, tuition has been rising due to the cuts of government funding in education. As an example, more specifically, the University of Pittsburgh has had an increase in tuition of 3.9 percent for the academic school year of 2014-15. In recent weeks, the U.S. Department of Education ranked Pitt as the most expensive public university for tuition and fees, just ahead of Penn State University, which this past year totaled $16,240 in the arts and science school.[11]

Canada

Canadians have been experiencing the rapid accumulation of student loans as well. As of September 2012, the average debt for a Canadian leaving college was $28,000, and that accumulated debt takes an average of 14 years to fully repay.[12] As a nation, Canadians have accumulated more than $15 Billion dollars of student loan debt, while Canadians continue to fight to protect their tuition rates from further skyrocketing.[13]

Social and political reactions

The growing problem of student debt has caused many reactions from young people throughout the United States. As a result, the Occupy Colleges and Occupy Student Debt movements merged in 2012 in an effort to gain support from students around the country.[14] There have been significant efforts made via social media for the Occupy Student Debt campaign. In particular, students all over the United States have posted their personal student debt testimonies.[15] Since last October, Occupy Student Debt has provided a platform for over 800 students to share their horror stories.[14] Because of this, other organizations such as, Rebuild the Dream, Education Trust, and the Young Invincibles, have joined in the effort and started similar platforms. The Occupy College movement itself has staged over 10 direct actions.[14][16] They have also gathered over 31,000 signatures on the White House’s petition site, “We the People”. As a result, President Obama announced the [20]

In April 2012, student loan debt reached US$1 trillion.[21] Severity of the student debt burden represents such a threat to the middle class that some have demanded a general bailout.[22][23] Anthropologist David Graeber, author of Debt: The First 5000 Years, argues that student debt is "destroying the imagination of youth":

If there’s a way of a society committing mass suicide, what better way than to take all the youngest, most energetic, creative, joyous people in your society and saddle them with, like $50,000 of debt so they have to be slaves? There goes your music. There goes your culture. There goes everything new that would pop out. And in a way, this is what’s happened to our society. We’re a society that has lost any ability to incorporate the interesting, creative and eccentric people.[24]

In 2014, a Chilean activist, artist Francisco Tapia, known as "Papas Fritas" (French Fries) "burned $500 million worth of debt papers" from Viña del Mar University, and displayed the ashes in a van as an art project. "The University was being shut down due to financial irregularities. 'It is a concrete fact that the papers were burned. They are gone, burned completely, and there’s no debt,' said Papas Fritas in his first U.S. broadcast interview. 'Since these papers don’t exist anymore, there’s no way to charge the students.'[25]

See also

External links

  • "Aging With Student Debt" Well-known Student Loan Advocacy group
  • Bloomberg "Student Debt" (July 2014)
  • Federal Reserve Bank of NY - U.S. Student Loan Debt Presentation from February 2013
  • Federal Reserve Bank of NY - U.S. Student Loan Debt Statistics
  • Federal Reserve Economic Data - FRED - "Student Loans Owned and Securitized, Outstanding"
  • "Forgive Student Loan Debt" Well-known Student Loan Advocacy site
  • "Get Out Of Debt" Informational site addressing College Debt, as well as other types of debt
  • "Occupy Student Debt" Students' reactions: Accounts of debtor stories
  • "Project On Student Debt" at the Institute for College Access & Success
  • "Student Debt Relief" at Equal Justice Works
  • "Student Loan Justice" Well-known Student Loan Advocacy site
  • "Student Loan Ranger" at Equal Justice Works
  • "Student Loan Ranger" at U.S. News
  • "The Law School Tuition Bubble" (Research & commentary on the Law School Tuition Bubble)
  • "Thirst For Justice" Higher-Ed Tuition Costs (A well-sourced advocacy Position Paper)
  • U.S. Department of Education Federal Government program, whose states mission in "About ED" section is "to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access."
  • "U.S. PIRG" Public Interest Research Group
  • Germany Makes College Education Free as American Students Drown in Debt. Truthdig, October 4, 2014.

References

  1. ^ http://www.thefallenamericandream.com
  2. ^ a b c http://www.insidehighered.com/news/2006/07/06/debt
  3. ^ a b Touryalai, Halah. "Student Loan Increase". Forbes (Forbes). Retrieved 19 February 2013. 
  4. ^ http://www.americanprogress.org/issues/higher-education/report/2012/10/25/42905/the-student-debt-crisis/
  5. ^ The Economist-Creative destruction-June 28, 2014
  6. ^ The Economist-The digital degree-June 28, 2014
  7. ^ Bloomberg-Student Debt-July 2014
  8. ^ a b c d e "Student Loan Debt Statistics". American Student Assistance. Retrieved 18 February 2013. 
  9. ^ a b "Student Loans: Debt for Life". Bloomberg Businessweek. Retrieved 18 February 2013. 
  10. ^ Carolyn Thompson (March 27, 2014). $1 trillion student loan debt widens US wealth gap. Associated Press. Retrieved July 7, 2014.
  11. ^ http://www.post-gazette.com/news/education/2014/07/18/University-of-Pittsburgh-spproves-3-9-percent-tuition-increase/stories/201407180160
  12. ^ "Student debt: Average payback takes 14 years". Financial Post. Retrieved 21 February 2013. 
  13. ^ "Canadian Federation of Students". Retrieved 21 February 2013. 
  14. ^ a b c Abrams, Natalia. "Occupy Colleges and Occupy Student Debt Join Forces". Retrieved 20 February 2013. 
  15. ^ "Occupy Student Debt". 
  16. ^ Goodman, Amy (2011-11-29). "Occupy Student Debt: Students Urged to Refuse to Pay Off Loans as Schools Hike Tuition".  
  17. ^ Kristof, Gregory (15 June 2012). "Hansen Clarke's Student Loan Forgiveness Act Finds Big Support Online". Huffington Post. Retrieved 25 June 2013. 
  18. ^ Hopkins, Katy. "1 Million People Show Support for Student Loan Forgiveness Act". Retrieved 25 June 2013. 
  19. ^ Park, Minjae. [http://www.washingtonmonthly.com/college_guide/blog/fix_the_economy_forgive_studen.php / "Fix the Economy, Forgive Student Debt"]. Retrieved 25 June 2013. 
  20. ^ a b Applebaum, Robert. "HR 4170 : The Student Loan Forgiveness Act of 2012". Retrieved 20 February 2013. 
  21. ^ Goodman, Amy (2012-04-25). "1T Day: As U.S. Student Debt Hits $1 Trillion, Occupy Protests Planned for Campuses Nationwide".  
  22. ^ Hickman, John. "Writing off a Generation". Retrieved 21 April 2014. 
  23. ^ Goodman, Amy (2013-07-03). "Failure to Stop Doubling of Student Loan Rates Sparks Call to Tackle "Systemic" Debt Crisis".  
  24. ^ David Graeber: ‘There Has Been a War on the Human Imagination’. Truthdig. Retrieved November 16, 2014.
  25. ^ Goodman, Amy (2014-05-23). "Exclusive: Chilean Robin Hood? Artist Known as "Papas Fritas" on Burning $500M Worth of Student Debt".  
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