The Student Loan Repayment Solution: It's All B.S.

“You have four years to be irresponsible here. Relax. Work is for people with jobs."

--- Tom Petty

 A recent study by credit-reporting agency TransUnion revealed that half of all student loans are currently in deferment. Being that the traditional pattern of student loan repayment is that payments are deferred until six months after the individual finishes his or her education, which supposes that the individual would have secured employment by that point, this may at first glance seem to be a startling statistic; in this, however, as in most cases, there are myriad factors at play.

This same study found that, from 2007 to 2012, the average amount of student debt increased by 30%. It's no surprise that the study period corresponds, ostensibly, to the period of time most affected by the economic recession; as federal funding for institutions of higher learning has become increasingly sparse, college tuition rates have increased to compensate. This can often be a shock to students or parents who had counted on more stability of college costs, prompting many to borrow money when they may not have had to do five years prior.

The recession has, inevitably, also brought with it a tidal wave of unemployment that has been particularly harsh on the generation graduating from college within the past decade. While the possession of a bachelor's degree is beneficial in attaining a well-paying job, it doesn't guarantee the presence of one. Without at least a bachelor's degree, however, many wind up facing unemployment or underemployment, neither of which is conducive to keeping student loan payments current.

With those rapidly rising tuition rates, unemployment, and rising housing costs, many students decide to forego a college degree. Despite this, over 30% of all American adults now possess bachelor's degrees, the highest percentage in recorded history. As our culture has increasingly pushed for higher education for all, many students choose to start college directly out of high school, only to realize they either cannot or do not have sufficient desire to attain degrees. While having a semester or 3 of college experience has been shown to correlate to a higher average income, the difference between incomes of those with high school diplomas and those with some college is negligible.

The U.S. Department of Education, in fact, reports that over 40% of all students who start college do not attain bachelor's degrees within 6 years. This might easily, in turn, account for a large amount of student loans being put into deferment; without a degree, individuals would have a lower likelihood of attaining high-paying employment, and may have greater difficulty in finding jobs to begin with. Simply finishing those degrees could have a drastic impact on this; a recent Georgetown University study indicates that over 60% of all employers are looking for degree-holding employees. With a national unemployment rate hovering at 8.2%, four years of college truly could be the defining factor between those who buy new homes and those rendered homeless.

With such potentially dire consequences to stalling or ceasing a college career mid-stride, why, then, do such high attrition rates exist? The answer to this question is simple: money (or the lack thereof). The U.S. Department of Education reports that 25% of all college students work full time jobs, while 60% work 20 or more hours per week. College drop-outs tend to be financially independent, typically due to lack of parental involvement. Often, due both to the strain of working while attending school and ignorance of the true economic benefits of possessing a degree, individuals make a value judgement and leave school in favor of a burgeoning career.

How can you avoid the trap of deferment, default, or drop-out? Well, the typical B.S. (or B.A., for that matter) can often do the trick, but it doesn't come cheap. A financial advisor who can locate sources of federal funds, as well as walk you through the process of applying for financial assistance and discover untapped sources of need-based aid can make all the difference. Click the company logo to the right for more information on how you or your child could attend college from commencement to graduation without fear of how the bills might be paid. An investment in the future is never a bad one, but loans must be repaid, and those two little letters, in our ever-changing society, can speak volumes.

References (click to link to articles):

"U.S. bachelor degree rate passes milestone," The New York Times, 2/23/2012.

"The value of a college degree," American RadioWorks, 2013.

"Why so many students who start college never finish," Examiner.com, 4/15/2010.

"As college debt grows, students delay payment," The Denver Post, 2/11/2013.