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Friday June 22, 2018


Student Debt Is Worse Than It Seems.

Student loans are proving to be a much bigger burden on households than previously thought. It's not surprising that student loan debt remains a problem child. College prices continue to defy inflation rates and the biggest percentage price hikes are coming from public universities, which is where most middle and low-income students have traditionally depended upon for bachelor degrees. They struggle to repay their loans. The colleges with the lowest student-loan repayment rates include many for profit colleges, but also some public and private non profit colleges, including a substantial number of historically black institutions. Even some wealthier, more selective colleges turn out to have a bigger student loans problem than previously realized. 

The NY Fed's Quarterly Report on Household Debt and Credit revealed that the delinquency rate for student loans, which is currently at 8.9 percent, increased during the second quarter. During the same period, student loan debt rose $10 billion to $914 billion. Among both public and private non profit institutions, the debt problem is most acute when students with very little money attend colleges with very little money. All 25 of the public universities with the highest five-year non repayment rates are historically black institutions. Of the 25 private colleges with the worst non repayment rates, 22 are historically black. One example, Lane College in Jackson, Tenn., has a 12.9 percent default rate but a 78.2 percent non repayment rate. Along with recent research finding that student loan defaults are Heavily concentrated among the most economically marginalized students,

The new data suggests that debt is a major financial obstacle for people who already face barriers to opportunity. Parents and teenagers must have honest conversations about what a safe level of college debt is.

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