The American dream. A slice of the pie. Or, for some, a poke in the eye with a sharp stick.
Starry-eyed high school graduates are seeking top paying jobs, but not every college graduate lands that six or seven figure job in their lifetime.
In fact, many reach retirement age still owing on student loans because life happened and the money was never there to pay for their shot at the gold ring. Student loan debt follows a student or their parents through life. For the most part, the loans are not subject to bankruptcy even if the student does not get the planned degree or can’t get a job in the field of study.
Student loan debt has doubled in the past 10 years to become the largest form of unsecured consumer debt in the country with more than 40 million borrowers owing over $1.4 trillion. Close to 70 percent of graduates leave college with an average debt burden of $30,000. One-in-four borrowers are behind on their payments or in default, according to figures from Illinois Attorney General Lisa Madigan’s office.
The vast majority of borrowers in default attended for-profit colleges. The U.S. Treasury reports that only 20 percent of eligible borrowers use the federal income-based repayment options, which can lower payments based on income to as low as $0 a month, according to Madigan’s figures. Madigan said loan servicers fail to provide affordable repayment options, follow borrower payment instructions and answer questions consistently. Scam artists exploit desperate borrowers with false promises to help in exchange for large, illegal up-front fees.
The next crop of student loan borrowers graduated this month.
Pekin Community High School had 410 graduates this year, of which 243 have stated they are going to a two-year, a four-year college or a vocational training school. The school has a list of 65 available scholarships on its website. Thirteen will go into the military upon graduation, citing educational benefits and serving their country as the reason.
“We encourage students to apply for school specific scholarships as well as local and national scholarships using programs such as Career Cruising to aid in finding said scholarships,” said Pekin District 303 Superintendent Danielle Owens. “Our counseling department works with students throughout their four years at PCHS to explore career and post-secondary options.
“The goal is always to find the right fit, both academically and financially. We hold several financial aid presentations and family nights throughout the year in conjunction with ISAC (Illinois Student Assistance Commission). We also have a local ISAC rep who comes to Pekin High twice a month to meet with students for individual sessions.”
The school does not have a college fair, but has over 40 colleges come during the school day to meet with students, said Owens.
“This choice depends on the major the student is selecting, financial aid that is offered and scholarships,” said Owens. “Students are encouraged to apply to the community college and four-year colleges.
“They are then encouraged to research, meet with the schools and make an informed decision. We remind students to ask four-year colleges if they will be given the same scholarship opportunities if they transfer in as a junior. Many four-year colleges do not have as many scholarships allotted for transfer students as they do for students starting as a freshmen. ... In other words, junior college may almost always be cheaper in the first two years, but then coming into a four-year university may make the last two years much more expensive.
Owens said the education before college is some of the most important research a student will do.
“Apply for financial aide, do your research and make sure you understand how the loan will work,” she said. “For example, knowing the difference between a subsidized loan, unsubsidzed loan or a loan from a private bank. Be diligent to make sure you are taking the classes you need for your major or program so that you are not having to take additional classes and additional loans.”
A legislator’s perspective
Sen. David Koehler, D-Peoria, said if Senate Bill 1351 is passed it would establish a Student Loan Bill of Rights that would apply to traditional bank or credit union loans, or for-profit company loans.
“A credit union or a bank already have a lot of laws in place and they have to service those loans in a proper way, but there are a lot of companies out there that are for-profit companies that take on student loans and some of them may not be as scrupulous as others,” said Koehler. “So students get into making bad decisions.
“Sometimes they will be mislead into borrowing more than they need or interest rates could be high and they don’t know it. Servicers must provide specialized employees to help struggling students. The servicers may not mislead the borrowers.”
Koehler compared a student loan to a mortgage.
“What happens is, and it could be younger students or adults, they really want to get this college degree because that’s their ticket to having a better job, etc.,” said Koehler. “When you go to the bank or a credit union for a mortgage, they do a pretty good job of laying out all of the details, all the realities of this is what happens if, if, if ... so that you go into it and know what the consequences are. Students need to know what is expected of them and then what happens if they don’t meet those expectations.”
According to a study by the Consumer Financial Protection Bureau, the number of older student loan borrowers has quadrupled since 2005 increasing from 700,000 to 2.8 million. The number of borrowers age 60 or older increased from 2.7 percent to 6.4 percent. Most are borrowing for their children or grandchildren’s education. Of that, 37 percent of those in default are 65 or older.
Baby boomers are ready to retire and some find themselves still in debt for student loans.
“That’s a problem,” said Koehler. “I think the federal government has tried to deal with that somewhat, but no one has really come up with an answer to it. The fact that student loans are kind of outside of the area of what happens in normal loans, you can’t forgive them in bankruptcy. Having a student loan is a real problem to some people. I don’t know. I’m at a loss of what they can do.”
Follow Sharon Woods Harris at Twitter.com/sharrispekin