Student Loans

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In 2010, one in five US households carried some form of student loan debt, up from one in eight households in 2004.1

In 2012, the average student loan borrower graduated with over $29,4002 in debt. In addition, defaults on student loans are rising. Almost 15% of borrowers entering repayment in 2010 have defaulted.3 –the Consumer Financial Protection Bureau (CFPB) estimates that 7 million student loan federal and private student loan borrowers have defaulted.4

There are multiple issues affecting student loan debt: more students going to college, climbing tuitions, stagnant household incomes and lost wealth from the recession, federal and state funding for higher education, fewer employment opportunities for graduates, to name a few. CRL’s work is currently focused in the following areas:

  • For-Profit Colleges: Tuition at for-profit colleges is typically funded by federal loans and Pell grants ($32 billion in 2009-2010), as well as by military and veteran tuition benefits. For-profit colleges absorb around 25% of federal student aid.5 It is critical that career education programs eligible for federal financial aid do not saddle students with loans they cannot repay. Nearly half of borrowers who default on federal student loans in the first few years of repayment attended for-profit colleges, even though these institutions only enroll 12% of all students.6 Many for-profit colleges are also known to engage in deceptive tactics to enroll students.

  • Fair Loan Servicing and Debt Collection: The Consumer Financial Protection Bureau (CFPB) has found that student loan borrowers are often victimized by loan servicer errors, charged exorbitant fees, and not clearly informed about their rights to modify their loans to make them easier to repay. This is similar to mortgage loan servicing problems during the financial crisis, which caused unnecessary foreclosures and lost wealth among too many US households.

  • Federal Loans First: Require “school certification” to ensure that borrowers take out all their federal student loans first before resorting to private loans. Federal loans are almost always preferable to federal loans because of more favorable repayment and forgiveness options.

  • Relief for Distressed Borrowers: Borrowers should have access to meaningful income-based repayment plans if needed. Any forgiven balances should be tax-free in order to preserve the benefits of forgiveness. Federal and private student loans should be dischargeable in bankruptcy.

  1. Pew Research at http://www.pewresearch.org/fact-tank/2013/07/01/248455/
  2. The Institute for College Access and Success (TICAS) at : http://projectonstudentdebt.org/files/pub/Student_Debt_and_the_Class_of_2012_NR.pdf
  3. Department of Education 3-year cohort default rate for FY 2010, at http://www.ed.gov/news/press-releases/default-rates-continue-rise-federal-student-loans.
  4. CFPB at http://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/
  5. Harkin Report at http://www.help.senate.gov/imo/media/for_profit_report/ExecutiveSummary.pdf The 25% figure includes Stafford loans and Pell Grants provided in Title IV of the Higher Education. It does not include other kinds of federal aid, such as military tuition benefits, so the actual percentage is higher.
  6. TICAS citing Department of Education statistics at http://www.ticas.org/files/pub//CDR_2013_NR.pdf