More college students are failing to pay back their federal government loans.
“The numbers show that people have had a hard time over the past couple of years with payments,” said Jane Glickman, a spokesperson for the U.S. Department of Education.
Nationally, the defaults on federal student loans has risen from 7 percent in 2008 to 8.8 percent in 2010, according to the most recent figures available from the U.S. Department of Education. That 8.8 percent translates into a little more than 400,000 student borrowers defaulting on loans worth $44.6 billion from 2008 through end of 2009, according to U.S. Department of Education.
New York students are doing a little better in repaying their federal loans than the national average, with a 7.1 percent default rate.
The main reason for the increase in defaults is the struggling economy, say education experts.
“The economy really put a burden on people trying to pay back their student loans,” said Lauren Asher, president of the Institute of College Access and Success. It is a research group headquartered in Washington, D.C. Asher specializes in student loans and financial aid.
“When people do not have jobs, they simply can’t pay back their student loans,” said Asher. “We can’t speculate on what the economy is going to do, but if people have jobs they can make payments.”
Now college graduates are competing for jobs in an economy with an unemployment rate at 8.3 percent. And with the average student graduating with at least $26,000 of student loans, students quickly can find themselves struggling to pay back the loans.
To help pay for college, 7.4 million students have taken out federal loans. To help them pay back the loans, the Obama administration is asking Congress to change how students repay their loans, increase the repayment time and even forgive some of students’ debt.
Among Obama’s proposals:
- Create a new program called “Pay as You Earn.” This allows individuals to limit their student loan payments to 10 percent of their monthly income, if they need to.
- Raise the maximum Pell Grant award to $5,550.
- Forgive the remaining debt of students who’ve been repaying regularly after 15 years instead of the current 20 years.
Even without those changes, federal loans remain a good deal for students, said Asher of the research group Institute of College Access and Success.
“Federal loans come with a lot of repayment plans,” said Asher, “and other borrower benefits that can help you stay out of default.”
(Amanda Watkins is a graduate student in broadcast and digital journalism.)