Category Archives: Student Debt

Why Young People Are Joining Unions Again

Source: Hannah Finnie, Talk Poverty blog, April 19, 2018

…. Young people are at a tipping point. They are frustrated by a system whose cracks were etched into place by preceding generations, but have only fully metastasized for theirs. They experience suffocating levels of student debt alongside declining wages and income equality while watching companies monopolize entire industries, and sometimes even nationwide elections. Representation—actual representation—feels more like theory than reality.

People are, finally, beginning to take notice of young people’s activism to fix that system. However, many are mistaking the new wave of media coverage dedicated to young people’s political activism for young people’s newfound political activism. It’s not that young people were ever politically dormant; it’s just that their activism has existed in places where older generations aren’t used to looking: on college campuses, like the Know Your IX movement and tuition equity campaigns for undocumented students, and inside activist movements like #BlackLivesMatter and #ByeAnita and #Occupy.

And now, increasingly, unions. ….

The Macroeconomic Effects of Student Debt Cancellation

Source: Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum, Levy Economics Institute of Bard College, February 2018

From the summary:
Among the more ambitious policies that have been proposed to address the problem of escalating student loan debt are various forms of debt cancellation. In this report, Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum examine the likely macroeconomic impacts of a one-time, federally funded cancellation of all outstanding student debt.

The report analyzes households’ mounting reliance on debt to finance higher education, including the distributive implications of student debt and debt cancellation; describes the financial mechanics required to carry out the cancellation of debt held by the Department of Education (which makes up the vast majority of student loans outstanding) as well as privately owned student debt; and uses two macroeconometric models to provide a plausible range for the likely impacts of student debt cancellation on key economic variables over a 10-year horizon.

The authors find that cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve). These results suggest that policies like student debt cancellation can be a viable part of a needed reorientation of US higher education policy.

Refinanciang Student Loans

Source: Dustin Weeden, LegisBrief, Vol. 25 no. 8, February 2017

Increasing numbers of students are borrowing money to pay for higher education, incurring historically high levels of debt. Policymakers are concerned about the amount students are borrowing, their ability to repay, and the broader economic impacts of student debt. Refinancing existing loans at lower interest rates is one solution, and at least 12 states currently operate their own refinancing programs for students.

Waiting for the Payoff: How Low Wages and Student Debt Keep Prosperity Out of Reach

Source: Allyson Fredericksen, People’s Action Institute, Job Gap Economic Prosperity series, People’s Action Institute, October 2016

From the summary:
Education is often lauded as the great equalizer and a solution to the growing income gap. But, as the cost of college breaks family budgets and requires students to take out thousands of dollars in educational loans, wages, even for those with a degree, have not kept pace, and have even declined in many occupations.

Though campaigns to increase the minimum wage have been won in cities and states across the country, current minimum wage rates do not provide a living wage for even a single adult. Research on living wage rates produced by People’s Action Institute shows that, nationally, a living wage for a single adult is $17.28 per hour. For those with student debt, that living wage rises to $18.67 per hour.

Increasing the minimum wage to a living wage and abolishing the tipped subminimum wage will help more workers make ends meet, but student debt forgiveness is also vital. And, because systemic barriers mean women and people of color are disproportionately impacted by low wages and student debt, more must be done to strengthen and enforce equal opportunity statutes.

At a minimum, working full-time should ensure financial stability, including the ability to pay off student loan debt. It’s time for elected officials to take action to make that a reality.
Table 1: Single Adult Living Wage vs Minimum Wage by State
Table 2: Median Student Debt and Monthly Payment for Graduates by State
Table 3: Traditional Single Adult Living Wage vs Student Debt Living Wage by State
Related:
Executive summary

Student Debt May Be Contributing to Racial Inequality

Source: Shahien Nasiripour, Bloomberg, October 24, 2016

Black college grads owe more on their student loans while being paid less than their white counterparts.
Related:
Black-white disparity in student loan debt more than triples after graduation
Source: Judith Scott-Clayton and Jing Li, Brookings Institution, Evidence Speaks Reports, Vol 2 #3, October 20, 2016

The moment they earn their bachelor’s degrees, black college graduates owe $7,400 more on average than their white peers ($23,400 versus $16,000, including non-borrowers in the averages). But over the next few years, the black-white debt gap more than triples to a whopping $25,000. Differences in interest accrual and graduate school borrowing lead to black graduates holding nearly $53,000 in student loan debt four years after graduation—almost twice as much as their white counterparts. While previous work has documented racial disparities in student borrowing, delinquencies, and defaults, in this report we provide new evidence that racial gaps in total debt are far larger than even recent reports have recognized, far larger now than in the past, and correlated with troubling trends in the economy and in the for-profit sector. We conclude with a discussion of policy implications. Black-white disparity in student loan debt more than triples after graduation.

Project on Student Debt – State by State Data

Source: Institute for College Access & Success (TICAS), 2016

Seven in 10 seniors (68%) who graduated from public and nonprofit colleges in 2015 had student loan debt, with an average of $30,100 per borrower. This represents a 4% increase from the average debt of 2014 graduates.

National, state, and college data on student debt from federal and private loans can be found in the full report. For more details, click on the map and other links on this page…..

Midyear update on student loan complaints: Income-driven repayment plan application issues

Source: Consumer Financial Protection Bureau, August 2016

This report analyzes more than 3,500 private student loan complaints, 2,400 federal student loan servicing complaints, and approximately 1,500 debt collection complaints related to private and federal student loan debt handled between October 1, 2015 and May 31, 2016. The information included in this report represents the Ombudsman’s independent judgment and does not necessarily represent the view of the Consumer Financial Protection Bureau….“This midyear update analyzes complaints submitted by consumers from October 1, 2015 through May 31, 2016. During this period, the Bureau also began handling complaints about problems managing or repaying federal student loans; this is the first report released by the Bureau discussing data on federal student loan servicing complaints. This report highlights the problems that borrowers face when seeking to enroll in an income-driven repayment plan, and provides recommendations to policymakers and market participants to better serve student loan borrowers.”…

The Scariest Student Loan Number

Source: Derek Thompson, The Atlantic, July 19, 2016

Some focus on the largest figures, like total student debt ($1.3 trillion) and average debt ($30,000.) So why is the most dangerous student loan number less than $5,000? ….

…..Loans of $10,000 account for two-thirds of all defaults. This is particularly tragic, because these debt-without-degree adults chased the American dream into a dead end. Almost all of the evidence available to economists suggests that college graduates are more likely to be employed and make more money than non-grads…..

Related:
Investing in Higher Education: Benefits, Challenges and the State of Student Debt
Source: White House Council of Economic Advisers, July 2016

Higher education is one of the most important investments individuals can make for themselves and for our country. Many students access student loans to help finance their education, and last year federal student loans helped 9 million Americans to make that investment in their futures. Typically, that investment pays off, with bachelor’s degree recipients earning $1 million more in their lifetime and associate’s degree recipients earning $360,000 more, compared to high school graduates. Society also benefits from these investments through such mechanisms as higher tax revenues, improvements in health, higher rates of volunteering and voting, and lower levels of criminal behavior.

At the same time too many Americans feel that college may be financially out of reach and are concerned about rising student loan debt. Student loan debt can be especially burdensome for those who do not graduate or who attend schools that do not deliver a quality education. However, unmanageable debt is not the only issue facing current and former students. Some individuals who could benefit from a high quality postsecondary education do not apply and enroll in college, under-investing in education and shortchanging their future…..

When Employers Pay Student Loans, Those Who Most Need Help Are Left Out

Source: Gillian B. White, The Atlantic, July 19, 2016

Companies are providing debt assistance to their employees—a nice, and rarefied, perk. …. The benefits tend to come in one of three forms: tuition assistance (which pays for school directly for employees who are currently enrolled), student-loan payment assistance (which helps graduates pay off their existing loans), and consolidation and refinancing opportunities. That last tool is a newer and less common perk. Refinancing can make a huge difference for those with significant debt; by lowering interest rates it can drastically reduce the total amount of money paid. …..