Recent statistics show the rate of loan defaults is increasing in an uncertain economy.
As the cost of tuition rises with the rate of inflation, the default rate for students across the country between October 2008 and September 2009 has swelled by almost 2 percent from the previous year, to 8.8 percent–the highest in 12 years, according to the Department of Education.
Meanwhile, Temple students have also experienced a tick in student loan defaults.
Temple’s student default rate has increased from 2.3 percent in 2006 to 3.3 percent in 2008, according to collegemeasures.org. Still, the numbers are in better standing than others in the nation.
The largest contributor in the spike of national student loan defaults are for-profit colleges. In 2009, 15 percent of students who attend for-profits defaulted on their loans, compared to 11.6 percent in 2008.
“The large numbers of students that are defaulting are going to for-profit colleges,” said David Glezerman, assistant Vice President of the Bursar.
Dr. Michael Bognanno, associate professor of economics, raised the same point.
“If you dig into this, the raise [in student loan defaults] is due to for-profit colleges,” Bognanno said.
Tuition increases, which cause some to take out additional loans, remain a prevalent thread of discord among the student body.
“I think about [loans] all the time…makes me wonder what the point of college [is,]” said Maryn Cahalan, a junior English major, adding that Temple’s recent 10-percent tuition increase creates a “lose-lose situation.”
An uncertain national economy has also made it a challenge for states to invest in education, especially higher education. Pennsylvania cut Temple’s appropriations by 19 percent.
But not all students feel the weight of loans.
Zach Harris, a junior geography and urban studies major, said that he is “super hyped” that he does not have to take out loans.
“One of the things that students are facing is unemployment,” Bognanno said.
The unemployment number among students with a degree is 4.7 percent, which is significantly lower than the 10.3 percent unemployment of the high school graduates and the 9 percent national unemployment average.
“A lot of students are making decisions based on student loans,” Glezerman said. “There is a generational shift.”
According to payscale.com, Temple graduate’s median starting income is $40,700, while their mid-career median salary is $76,100.
Entrance and exit interviews are required when requesting loans provided by the state or federal government. Student Financial Services also houses a number of economic advisors to help students design an economic plan, among other things.
Glezerman said when dealing with student debt, it is paramount to know how much one owes and to have a plan to “get it over with.”
Consequences for defaulting on student loans can create baggage, like bad credit scores, which can takes years to eliminate.
The federal and local state governments often provide incentives, like a gradual reduction of debt, for students who choose careers in education in low-income areas, criminal justice and other public-sector jobs.
“Most of my friends take out loans,” said Meera Desai, a senior finance major, who said she does not have to take any out. “They can’t even go out after they buy books.”
Josué Mercado can be reached at firstname.lastname@example.org.