The cost of public higher education, greatly affected by struggling state revenues, is growing – quickly. Public colleges in most states have watched state appropriations dwindle since before the recession. To keep academic programs rolling, campuses are raising tuition and fees at a staggering rate. Students are forced to take out more loans to cover their costs.
The class of 2011 graduated with an average student loan debt of $26,600. That pales in comparison to 2012 graduates who owe $29,400, on average, according to the Project on Student Debt at the Institute for College Access and Success. So, what’s driving this debt besides higher costs? For one, parents can’t keep up. They’re only covering 27 percent of the costs, according to a study by Sallie Mae. In 2010, parents could pay for about 37 percent of the cost.
With the continued increase in student loan debt, defaults on student loans continue to rise as well. Many students chose a career path that can’t keep up with their debt. High debt is affecting their lives, keeping them from buying a house, getting married and starting a family. Many students coming out of college and looking to get into the workforce are having a difficult time. The salary often underwhelms those who do find jobs. As the job market continues to recover, it’s not fast enough, according to the student loan default rate.
The Department of Education said in October that the number of students defaulting on their student loan debt has increased for the last six years. Those who defaulted within two years of their first payment date were at 10 percent in 2011, up from 9.1 percent the previous year. The rate at which students default within three years of their first payment date rose from 13.4 percent to 14.7 percent in 2011.
Default occurs when a loan is 270 days past due. Arne Duncan, Secretary of Education, said the rise in the default rate is “troubling” and that his department would work with higher education institutions and borrowers to help them keep their debt reasonable.
The danger to colleges and trade schools is very real. If the school’s two-year default rates go higher than 25 percent for three years or more than 40 percent in one year, they can lose their ability to accept federal aid. It’s more important than ever for institutions to cover themselves and ensure that they educate students not only in liberal arts, but in their financial responsibilities.
Financial trouble hits students at tech schools and private schools too. Many times, these students have access to other forms of loans from third-party finance companies. Omega RMS, llc., works with these companies and educational institutions to ensure that the students who fall behind have options to catch up.
Omega has experience working in the education industry, giving their clients the power to focus on education and not on bill collecting. Omega has the expertise to work with students who struggle to keep up on their student debt.