In the past four years, college debt loads have increased and a growing number of students are borrowing money to pay tuition. But as the number of students borrowing increases, the percentage of young borrowers to fall behind on their student loan payments has skyrocketed.
A report released by the Federal Reserve Bank of New York said 35 percent of people under 30 who have student loans were at least 90 days delinquent on their payments at the end of 2012. That’s up from 26 percent at the end of 2008 and 21 percent in 2004.
Sue Steeno, assistant director for the Office of Financial Aid and Student Employment, said statistics at UW-Green Bay aren’t nearly as staggering.
Steeno said the default rate at UWGB has gone down from 2.8 percent to 2.3 percent during the last year, according to records for the fiscal years of 2010 and 2009. She said these rates are well below the current national average of 9.1 percent.
“While this is a good thing, our population of defaulted students has indeed gone up during the long term, and I’m sure some of this can be attributed to the economy as well as other factors,” Steeno said. “In the 2008 fiscal year, our default rate was just 0.8 percent, so you can see that it has definitely gone up during a longer period of time.”
Shannon Bauer, former UWGB student and financial services employee of nine years, said making payments on time is very important.
“Payment history is a major factor in a person’s credit score, which affects his or her ability to borrow money for anything in the future, including a car or home,” Bauer said.
However, making payments on time is becoming increasingly difficult for some graduates.
Junior accounting major Matthew Honzik has worked in the financial services industry for four years. He said the amount people are getting paid after graduation is not keeping pace with the cost of tuition, which inevitably results in delinquencies.
“We have a system in place where there’s a constant rise in the price to attend college,” Honzik said. “The price of school is inflated because student loans are easy to get, whereas if people with the same income level were to apply for a home loan, they wouldn’t be able to do so because there’s no income.”
Steeno said about 70 percent of the student population borrows at some point during their time in college, and that number that hasn’t changed much over the years.
Statistics from UWGB’s Institutional Research Office show the number of UWGB students to complete the FAFSA is up to 81 percent for the 2012-13 academic year compared to 77 percent for the 2009-10 academic year.
Steeno said students should borrow no more than is necessary to cover their expenses. Following a budget is an effective way for students to ensure they are not borrowing too much.
“When meeting with students to discuss borrowing, we always counsel them on taking out only what is needed and following a budget rather than borrowing the maximum,” Steeno said. “All new student borrowers also have to complete what is called Loan Entrance Counseling, which is a federal requirement.”
The online session educates students on loan fees, the effect of borrowing and students’ rights and responsibilities when borrowing from a student loan program. Steeno said students can calculate their direct costs of attendance and money management on the financial aid office’s website.
Senior communication major Corrissa Frank said she thinks students don’t completely understand what kind of commitment they are signing up for when agreeing to paying back what they owe.
“They automatically think by the time they graduate, they will be able to pay back the large debt of tuition,” Frank said. “But it takes an actual plan to be prepared.”
Frank said it’s important for people to plan their decisions about where to go to school and what they expect for a salary once they graduate.
“It’s important to consider what a post-graduation salary will be when deciding how much to borrow,” Honzik said. “College is important, but don’t let debt rule your life.”