Student Loans In Default – Another Recession Symptom

Student Loans In Default – Another Recession Symptom

Imagine never thinking you could afford college, never making it a priority due to cost, and then, one day, a magic fairy (commonly known as a guidance counselor) brings you in to her fairy lair and tells you…”You can go to college.  Just fill out this form and we’ll get you a student loan.”

Eureka!  The world is your oyster.  Lawyer, doctor, teacher, you name it – it can be yours!  So you go off to college, all the while your student loans are hard at work paying for school, and you earn that diploma.  You start your career as a first year teacher, making $35,000 per year.  And then you get the bill….

Now more than ever, graduates are defaulting on their student loans, according to the United States Department of Education.  The college fairy tail has been brought back to reality – five years after its hopeful beginning.  According to the report, during fiscal year 2008, 238,000 Americans defaulted on their student loans out of 3.4 million borrowers who were in their repayment phase.

According to the U.S. Secretary  of Education Arne Duncan, “This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times.”

According to the report, students attending for-profit schools were more likely to default on their loans. While unemployment rates remain close to 9.6%, more and more college students are leaving the doors of their university with a diploma, and little opportunity for finding work.

While college graduates who graduated in spring of 2009 had it better than those who graduated in spring of 2008, the outlook still is bleak.  According to the New York Times, “Average starting salaries are down, and employers plan to make only 5 percent more job offers to new graduates this spring compared to last spring, when job offers were down 20 percent from 2008 levels, according to a study by the National Association of Colleges and Employers, which tracks recruitment data.”

Before these statistics make a college student want to throw in the towel and start working at the local factory, college graduates are still better off than those who do not attend college. According to the Bureau of Labor Statistics, the unemployment rate for high school graduates under the age of 25 who do not attend college is 24.5%
The unemployment rate for college graduates under age 25 is 8%.