Paying for College

Student Loan Relief

I recall having paid on student loans for what seems like forever.  Both of my children had student loans, too, and they paid diligently for years and years.  The good news: It's a great way to build a strong credit rating (assuming that you pay).  The bad news: Those loans can mount up and you can graduate from college owing tens of thousands of dollars.

Well, there appears to be some relief in sight:


Some Relief On Student Loans

Repaying a student loan could soon be a little less painful.

Starting this week, anyone with a federal student loan can apply for a new Education Department program, which caps monthly payments based on income and which forgives remaining balances after 25 years. Those agreeing to public service work could have loans forgiven after 10 years.

Eligibility for income-based repayment is determined by a person's income and loan size. A calculator at http://www.ibrinfo.org can help borrowers determine their eligibility for the plan, which becomes available Wednesday.

The program stems from the College Cost Reduction and Access Act, signed in 2007, which authorized the creation of an income-based repayment plan for some types of loans.

Payments would amount to less than 10 percent of income for most of the estimated 1 million people expected to enroll, experts say. Payments would never exceed 15 percent of any income above about $16,000 a year (or 150 percent of the poverty level). Those who earn less than $16,000 would not have to make any monthly payments.

If you're not familiar with the level of debt students carry, here are some statistics for the undergraduate population:

Student Debt Statistics

With loans being the primary source of federal aid today, students of all types need debt management and financial literacy skills. Here are some fast facts about students and debt today.

Undergraduate Students

  • Number of undergraduate students attending 4-year schools in 2007: 8,986,150

    Source: National Center for Education Statistics

  • Between 2007 and 2018, undergraduate enrollment in 4-year colleges is expected to increase by 12%, while enrollment in 2-year colleges is expected to increase by 13%.

    Source: National Center for Education Statistics

  • In each year between 2000 – 01 and 2006 – 07, an estimated 60% of bachelor’s degree recipients borrowed to fund their education. Average debt per borrower rose 18%, from $19,300 to $22,700 in 2007 dollars over this time period. Average debt per bachelor’s degree recipient increased from $10,600 to $12,400.

    Source: The College Board (Trends in Student Aid – 2008)

  • In 2008, 84% of undergraduates had at least 1 credit card, up from 76% in 2004, the last time the study was conducted. The average number of cards has grown to 4.6, and half of college students had 4 or more cards.
  • Undergraduates are carrying record-high credit card balances. The average (mean) balance grew to $3,173, the highest in the years the study has been conducted. Median debt grew from 2004's $946 to $1,645. 21% of undergraduates had balances of between $3,000 and $7,000, also up from the last study.

    Source: Sallie Mae

  • In 2007 – 2008, lenders provided about $17 billion in private loans, a 592% increase from a decade earlier.

    Source: The College Board (Trends in Student Aid – 2008)

  • Nonfederal student loans grew rapidly for most of the decade, increasing from 7% of education loans in 1997 – 98 to 23% in 2005 – 06. However, the growth in these loans, which carry no subsidy and generally have less favorable terms than federal loans, slowed in 2006 – 07. Private loan volume declined slightly in inflation-adjusted dollars in 2007 – 08, but still represents 23% of the total loan volume.

    Source: The College Board (Trends in Student Aid – 2008)

  • In 2003 – 2004, private loans* were taken out by:

    • 5% of students in public 4-year colleges (compared to 43% who took out federal loans)
    • 11% of students in private 4-year colleges (compared to 54% federal)
    • 15% of students at for-profit colleges had private loans (compared to 80% federal)

    Source: Project on Student Debt

    *Please Note: These figures represent borrowing in 2003 – 04 alone, not those who may have loans from any year, and do not include parent loans.

  • In the 2007 – 2008 year, proprietary schools at all levels and private (non-profit) 4-year schools had disproportionate numbers of students taking out private loans.

    • Students attending proprietary schools composed about 9% of total undergraduates, but 27% of those taking out private loans.
    • Students attending private 4-year schools composed about 13% of total undergraduates but 22% of those taking out private loans.
    • In contrast, the percentage of private loan borrowers who attend public 4-year schools (28%) is basically the same as the percentage of undergraduates overall who attend public 4-year schools (29%).

    Source: Project on Student Debt

That's a lot of debt. Perhaps this new program will help. Remember that old TV commercial that said, "How do you spell relief? R-O-L-A-I-D-S." Well, maybe now you can spell relief U-S-D-E-P-T-o-f-E-D.

Don’t forget to check out all my admissions-related articles and book reviews at College Confidential.