Student loan debt has been in the headlines for some time now, and some financial analysts predict it could become the next housing bubble. Fingers have been pointed in all directions, with some blaming graduate students for the burden, others recognizing for-profit institutions' role in the problem, and others simply arguing that the cost of higher education is getting to be too expensive for anyone anymore.
U.S. News and World Report recently compiled a list of schools ranked by “grads with the most debt.” Only three of the top 10 were not located in New England, with small, East Coast liberal arts schools dominating the list.
It may seem logical for students to want to graduate quickly if they’ve taken out loans, but this does not appear to be the case. At Becker College, a liberal arts school where almost 95% of students borrow money, only 18% of students graduate in four years. A similarly troubling picture is seen at Clark Atlanta University, where 93% of grads have loans, but only 24% completed their programs within four years.
The issue is now receiving a sense of urgency from policy makers. The departments of Treasury and Education have pitched an idea that would have student loan debt wiped after 20-25 years using tax time, Politico reported in March. The catch? A potentially hefty bill from the IRS down the road.
The Obama administration has also taken to cracking down on the deceptive practices of for-profit institutions, which accounts for almost half of student loan defaults but only 13% of college enrollment. Under new federal regulations, for-profit colleges must now prove that a student's loan debt does not exceed 8% of their total post-graduation income, and that its default rate does not exceed 30%. If the institution fails those tests, the college does not qualify for federal student aid programs. Of course, under a national rankings system like the one proposed by President Obama last year, non-profit higher ed institutions would also likely be subject to closer scrutiny of their graduation rates and student debt burden.
For more details on the student loan crisis, check out the December 2013 report from “The Project on Student Debt.”
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