Copyright © 2010

What you should know about

Student Loan Debt.

Student Loan

Debt In America

2 Student Loan Debt in America

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| Introduction

| The Crisis Is Real (Facts)

| The Need for a Degree

| Stagnant Wages

| The Effect on Individuals

| So What Now?

| About NBP

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3 Student Loan Debt in America

much so that it has entered the presidential campaign's hot-button

soundbite arena. Democratic presidential hopeful Bernie Sanders

has gone so far as to propose making tuition completely free at all state

colleges and universities. Both Sanders and rival Hillary Clinton have

proposed various ways to minimize student debt. In a May 2016 New

Republic article, Donald Trump proposed a two-prong reform that would

strive to achieve the following goals:

• Change the student loan program to provide more incentives for

colleges and universities to enroll students who will be successful and

earn enough money upon graduation to pay back their loans

• Return the federal loan program to its pre-Obama status by having the

loans come from private lenders rather than the federal government

A college education remains the best way to ensure a successful

career, but a number of factors in recent years have increased the cost

of this education while simultaneously making payment more difficult.

Debt-ridden students are unable to buy homes and cars, and this

failure to reach certain economic milestones on their way to achieving

the so-called American Dream adversely affects the overall U.S.

economy.

Student loan debt has become a staggering national problem, so

4 Student Loan Debt in America

One in four student loan borrowers are either in delinquency or default on

their student loans, according to the Consumer

Financial Protection Bureau.

The recent statistics about student debt are simply staggering. Student

loans make up the nation’s second largest consumer debt market,

which has grown rapidly in the last decade.

• The Consumer Financial Protection Bureau (CFPB) reports the total

volume of outstanding student loans has more than doubled, rising

from less than $600 billion in 2006 to more than $1.2 trillion today.

• According to Forbes, student loan debt constitutes the second-highest

level of consumer debt behind only mortgages. Most of that is

comprised of loans held by the federal government.

• MarketWatch states that about

40 million Americans hold

student loans and about 70

percent of bachelor’s degree

recipients graduate with debt.

Edvisors reports that in 2015, the average total student loan debt at

graduation, including both federal and private student loan debt, was

about $35,000 for bachelor’s degree recipients, $51,000 for master’s

degree recipients, $71,000 for Ph.D. recipients, $167,000 for law school

graduates and $207,000 for medical school graduates.

1 in 4 student loan borrowers

are either in delinquency or

default on their student loans,

according to the Consumer

Protection Bureau.

5 Student Loan Debt in America

Last September, a Brookings Institution study

found the increase in the percentage of students

borrowing to attend for-profit colleges and two-

year community colleges accounts for a large

share of the growth in the number of students

struggling to pay off their loans.

In 2015, the government implemented its gainful

employment rule, which requires for-profit

colleges to prove that it is preparing graduates

to get a job in order to continue to receive

federal financial aid funding.

“We are concerned

about our graduates’

ability to repay their

student loans, and we

are continually

exploring new tools

and strategies to help

students understand

their options and

ultimately meet their

obligations,” Hardman

wrote in a statement.

6 Student Loan Debt in America

Having a four-year degree displays commitment and dedication; for

employers, that degree acts as a broad screening tool to help recruit better

workers. In February 2013, the New York Times reported that many employers

require a college degree for even file clerks and in-house couriers earning $10

an hour.

In its recent study, Boston-based Burning Glass, a company that analyzes job

ads from more than 20,000 online sources, concluded that an increasing

number of job seekers are being shut out of middle-skill, middle-class

occupations by employers’ rising demand for bachelor’s degrees.

Moving the Goalposts: How

Demand for a Bachelor’s Degree Is

Reshaping the Workforce

An increasing number of job seekers

face being shut out of middle-skill,

middle-class occupations by employers’

rising demand for a bachelor’s degree.

This credential inflation, or

“upcredentialing” is affecting a wide

range of jobs from executive assistants

to construction supervisors and has

serious implications both for workers not

seeking a college degree and for

employers struggling to fill jobs.

Burning Glass

7 Student Loan Debt in America

Requiring a degree may make the task of finding the right

person much more difficult, yet many employers are willing to

wait.

This credential inflation affects a wide range of jobs, from executive

assistants to construction supervisory positions. This has serious

implications for workers not seeking a college degree and for

employers struggling to fill jobs.

• There has been a marked shift in occupations formerly

dominated by workers without degrees. For example, 65

percent of postings for Executive Secretaries and Executive

Assistants now call for a bachelor’s degree. Only 19 percent of

those currently employed in these roles have a B.A.

• In other occupations, such as entry level IT help desk positions, the

preference for a bachelor’s degree has increased even though the skills

indicated in job postings don’t include skills typically taught at the

bachelor’s level. In fact, there is little difference in skill requirements for

jobs requiring a college degree from those that do not, suggesting that

employers may be relying on a B.A. as a broad recruitment filter that

may or may not correspond to specific capabilities needed to do the job.

• The research revealed that certain types of positions that require a

B.A. take 61 days to fill on average, compared with 28 days for

postings that don't require a bachelor's degree.

Other key findings of the report:

8 Student Loan Debt in America

All this means that more

students are going to

school with less money to

pay for it.

Long Term Effect On Individuals

In 2013, the government garnished about

$150 million in Social Security benefits

from Americans to pay back their student

loans.

Americans’ wages have basically remained stagnant. According to Pew

Research, for most U.S. workers, real wages — after inflation is taken

into account — have been flat or even falling for decades, regardless of

whether the economy has added or subtracted jobs. The average wage

peaked more than 40 years ago: The $4.03-an-hour rate recorded in

January 1973 has the same purchasing power as $22.41 would today

(2014). All this means that more students are going to school with less

money to pay for it, and parents are having a harder time coming up with

the cash required to send their kids to college.

According to Marketwatch,

the gap between the

earnings of high school

and college graduates hit

a record high in 2013, in

large part because the

wages of high school graduates have dropped off precipitously over the

past few decades.

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The job market’s increased need for a degree, coupled with the enormous

financial burden of college, adds a crippling burden to graduates

embarking on their futures. How many teenagers can fathom what a debt

of $100,000 or more means to their future? How will it impact their ability

to buy a home or plan for children and their eventual college education?

Indeed, the current system of financial aid and rampant student

indebtedness is producing devastating long-term consequences. In Kelley

Holland’s article about the crisis, associate professor of practice in the

10 Student Loan Debt in America

School of Social Welfare at the University of Kansas Melinda Lewis, who

has studied the current system of financing college, says, "It has

reduced the ability of our educational system to be a force for upward

mobility.” She adds that while it is still true that you are better positioned

if you go to college, you are not as much better positioned if you have to

go to college with debt.

Demos, a public policy think tank, found that home ownership is

significantly lower among 20-something households: 52.3 percent of

those households with student loan debt own homes, compared to 58.8

percent of households without student loans.

November 2015 data from LIMRA, an association providing research

and consulting to insurers, shows that just $30,000 in student debt can

cut as much as $325,000 from a 401(k) balance by the time or

retirement. The institute also examined the amount of education debt

held by those close to retirement and found a sharp increase over 25

years. In 1989, just four percent of people aged 55 to 64 had education

debt, but by 2013, that figure had grown to 30 percent.

In 2013, the government garnished about $150 million in Social Security

benefits from Americans to pay back their student loans, according the

Government Accountability Office. Between 2002 and 2013, the number

of senior citizens losing out on a portion of their Social Security to pay

back education debt soared from 6,000 to 36,000.

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After college, a graduate must choose a debt repayment method for his or her

student loans. Exit counseling about repayment is required when a student

graduates, leaves school or drops below half-time enrollment. “When you

graduate, you have about six months to figure out what you’re going to do to

repay your loans,” said Ian Foss, a policy liaison with the U.S. Department of

Education. Therefore, graduates should get started immediately, as default will

cost them dearly in the long run. Student loans can be the key to a college

education and a life of increased Therefore, graduates

should get started

immediately, as default

will cost them dearly in

the long run.

opportunity and earning prospects, but

students and parents need to educate

themselves before deciding how much

debt to take on. An honest appraisal of

earnings prospects, future goals, the true cost of college and the effects student debt

is required. Such an assessment is essential to avoid hamstringing your future.

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