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The Pew Research Center has got this headline blaring out at us today, sending shivers through our wallets and bank accounts: “A Record One-in-Five Households Now Owe Student Loan Debt.” The figures are from 2010, in which 19 percent (22.4 million) of homes had student loans that are being repaid or are in deferment. This is an increase from 15 percent in 2007, just before the economic collapse.

A whopping 40 percent of households led by someone 35 or younger have student debt.

And this is crazy: The research finds that “whether computed as a share of household income or assets, the relative burden of student loan debt is greatest for households in the bottom fifth of the income spectrum, even though members of such households are less likely than those in other groups to attend college in the first place.” The poor can’t win. But even among the rich, the amount of debt has risen.

The AP points out (h/t to our writer Ann Brown) that part of the trouble is the job market. With many college students struggling to find jobs after graduation, debt lingers. Another part is the continued increase in the number of people choosing to attend college.

The average student loan balance is $26,682 with 10 percent owing more than $61,894. Interestingly, Pew notes, “Average household indebtedness fell from $105,297 in 2007 to $100,720 in 2010.” So other debt has fallen even as college debt grows.

To reduce that other debt, people are refinancing their mortgages (our tips on that here) and making strides in paying down credit card debt.

This reiterates the importance of living within one’s means and saving for college. ICYMI, here’s our story from a few weeks ago about applying for government help to pay for college. These resources are crucial now.

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Would forgiving student loans help economic recovery?  Last week, I was hanging out virtually on my Facebook wall, when I noticed a number of requests to sign a petition to support House Resolution 365, a bill that seeks to provide student loan debt forgiveness as a means of economic stimulus.

U.S. Congressman, Hansen Clarke (D-MI) is spearheading the movement and has said that he has sponsored the bill based off the simple belief that if the loans are forgiven, then the money that would normally go to pay off those loans will be dropped back into the economy, stimulating the need for more jobs.  So far over a quarter of a million people have signed the online petition, which is circulating on SignOn.org and other progressive sites.

Like many college graduates, I am overburdened by student loan debt. Since graduating in 2000,  I’ve been grabbling with how to pay back the over $30k, on a community organizer’s salary no less, while also maintaining a standard of living, which will allow me to have food, shelter and other necessities.  And yet I realize that my struggles with my loans, which had been reconsolidated, deferred and placed in forbearance more times than I can count, pales in comparison to the debt that many other college alumni, who have graduated into a stale market, have been saddled with.

Part of me imagines that many of the kids protesting outside of Wall Street do so out of the frustration of being over educated and under-employed/unemployed.  And who could blame them?  This past year, total student loan debt finally surpassed total credit card debt in America, and is on track to exceed one trillion dollars within the next year. The U.S. Department of Education’s own statistics suggest that the default rate has risen to 8.8 percent, up from 7.0 percent in 2008. Today’s graduates watched as companies like Goldman Sachs and Well Fargo received bailouts, and then turned around to make record profits, while they flounder in the abyss of unemployment, underemployment and debt.

Although the federal government already has loan forgiveness programs, the requirements to even qualify for this program are restricted to certain fields; it would probably be easier to win the lottery than to actually have one’s loans forgiven. With American’s mounting debt and economist warnings of a student loan bubble coming anytime soon, maybe we should start thinking very seriously about bailing out the country’s educated class.

The New York Times recently highlighted a report from Complete College America, a Melinda Bill Gates Foundation funded non-profit group, which has produced a comprehensive report of today’s college student, their challenges and the reasons why they are not completing their degrees and certificates. According to the report, about 4 of every 10 public college students attend part time — and no more than a quarter of part-time students ever graduate.  One of the reasons, as attributed by the reports, is the large number of students mired in noncredit remedial classes, which includes half of all students studying for an associate degree, and one in five of those seeking a bachelor’s degrees, many of them never move on to credit-bearing courses. But the most important factor is that the rate of inflation for college tuition has not matched salaries of those, who are now entering the workforce. According to the National Center for Education Statistics (NCES), the cost of a public four-year degree has nearly doubled between 1964 and 2009 when adjusted for inflation.

Justin Wolfers, of Freakonomics, offered several reasons for why he believed that forgiving student loan debt will do little to stimulate the economy. For example, he argues that college grads typically have higher incomes than non-degreed workers and if the government eliminates their debts, the educated class would be more inclined to save their money as opposed to spending it within the market. However, the flaw of Wolfers’ argument is that even with a wage step back for college graduates, a college graduate is still expected to make double that of a high school graduate, who is slowly being pushed out the employment market.

Likewise, even if the very short-term plan for a person is to save their extra money, generally the point of saving money is to someday have enough of it to spend it on such big ticket items like houses and cars. This spending would obviously add a boost to the economy while creating a higher demand for jobs in both the auto industry and housing construction sectors.

It is a cruel reality for those who felt that they did everything “right” and are still not able to maintain a decent standard of living.  Truthfully, even as I struggle monthly to keep up with my loan repayment, I don’t know for sure if student loan forgiveness is just a temporary fix to a long-term problem. Not saying that if it was offered, I wouldn’t take it.  Right now, my 1995 Toyota Camry, with its 132 thousand miles, is probably on its way to the great junkyard in the sky.  And without a little financial boost, the only other option I see for a replacement for my sole source of transportation is if Oprah suddenly shows up to my house one day and says, “You are getting a brand new car.” Fingers crossed. But besides my purely selfish desires, even if our debt is forgiven what happens to the next generation of college grads, who find themselves in similar situations? Do we forgive those loans too? Not that I’m opposed that idea but if so, why not focus on the longer-lasting solutions to making education accessible and less financially burdensome for all?

Charing Ball is the author of the blog People, Places & Things.

How many of us lament our student loans? Paying off a high monthly bill is a hard reality to accept, especially for those who are currently struggling with assessing the worth of a debt that has yet to lead to a steady or worthwhile career.  As part of its annual rankings of colleges and universities, US News & World Report also analyzed data related to the amount of loans that students graduated with. The results are pretty interesting, but all these rankings should be read with a bit of skepticism. After all, even though a Harvard grad emerges with less debt, on average, than Clark Atlanta University grad, it should be taken into account that many Harvard students come from wealthier backgrounds, and that fact inevitably skews the numbers.

In any case here’s the list of 5 colleges with most student debt and 5 colleges with the least student debt for its undergraduate grads.

 Top 5 Colleges With Most Student Debt

5. Florida Institute of Technology
Location: Melbourne, Florida
Size of school: 5,022 undergraduate students
Percentage of graduates with debt: 65%
Average amount of debt: $41,565

(Huffington Post) — For-profit colleges devote less than a third of what public universities spend on educating students, even though the for-profit institutions charge nearly twice as much as their public counterparts for tuition, according to new federal government data released Thursday.  Students attending bachelor’s degree programs at for-profit schools are also much less likely to graduate than students who attend public universities or private non-profit schools, concludes the report from the National Center for Education Statistics. One in five students graduate from for-profit bachelor’s degree programs within six years, compared to more than half of students at public universities.  The new federal data lands amid fierce debate over the practices of for-profit colleges, which confront the stiffest government scrutiny in decades. The Obama administration has been crafting new rules aimed at preventing schools from promising more than they can deliver, in response to reports that many tout their training programs as stepping stones to lucrative careers only to set up students up for jobs whose wages will rarely keep pace with their resulting debt burdens.

Read More…

By Charlotte Young

Back in the day, financial assistance from parents would stop around age 18 for non-students, or immediately following college graduation. But now, who knows? Forbes reports that a recent online survey conducted by ForbesWoman and the National Endowment for Financial Education (NEFE) reveals that 59 percent of parents still provide support to their adult children who are no longer in school from ages 18-39.

Of course, the current economic climate does account for part of the financial dependency. Young adults have experienced “one of the worst recessions since the depression,” and amassing thousands of dollars in college debt hasn’t made things any easier. Not wanting to see their children struggle, the majority of parental assistance extends to housing, living expenses and transportation costs. Concerned parents are also offering assistance for insurance coverage, spending money and medical bills.

Dr. Vivian Diller, a New York-based psychologist, notes that it’s not just the economy that’s causing parents to assist children. She says the family structure has become more “child-centered” in the last 20 to 30 years with parents supporting their children’s lifestyles.

In some cases, this shift has been a blessing: 75 percent of children living at home do help out with family expenses such as groceries and utilities. But it can also be a crippling disadvantage for young adults who don’t learn how to manage money or grasp independence. For some parents, it’s been a devastating sacrifice since they lose privacy, face delayed retirements and take on more debt.

Suzanna de Baca , vice-president of wealth strategies at Ameriprise Financial, warns that once financial security is in danger, parents won’t be able to help themselves or their children. The best thing for parents to do is to set clear boundaries and expectations. Once guidelines are in place, parents can check in regularly with their children to make sure they stay on track. Not only must young adults keep their future in focus, but parents must do so too.

by Charing Ball

Over $36 thousand.  No, that’s not my income, in fact that’s more than I will make this year. $36 thousand is how much I owe in student loans.

Ten years and three months removed my graduating from Virginia Union University, I am nowhere closer to paying down the debt as loans composed most of my financial aid. Like many Americans, I have exhausted all deferments, forbearances and modifications options and am caught between dogging phone calls from my loan provider and digging between seat cushions, just to scrape together enough to remain current.

As a first generation college grad, I once looked at my degree as a way to escape poverty by opening doors to better career options and more money.  However, when I add up how much I’ve been paying in rent, utilities, car insurance, health insurance, food and student loans, and subtract that from my public service salary plus the money I earned through writing and other side ventures, my current finance fails to make dollars and sense.

According to a recent study by the College Board, I am in plenty of good – or unlucky – company as almost one-out-of-five graduates with bachelor degrees will not be able to make payments on the average undergraduate loan debt, which now stands at a whopping $30,500 (pre-interest). If that’s not disheartening enough, consider that for the first time ever, student loan debt now outranks credit card debt.

Let me say that again; Americans now have accrued more debt by pursuing higher education than by using their credit cards. To be exact – $605.6 billion in federal student loans outstanding and $167.8 billion in outstanding private student loans. The news is even more troubling for both the African American and Latino communities, who borrow disaportionately to pay for private nonprofit or for-profit college than a public four-year college.

How did this happen?

Well, there are a number of variables that have contributed to this perfect storm of debt: According to the College Board study, borrowing has doubled over the past decade, to roughly $85 billion in new student loans in the 2007–08 academic year, mainly to keep up with the rising college cost, which too has ballooned at twice the rate of inflation.

When students have exhausted all other forms of federal and scholarship aid including Pell Grants and scholarship, they often resort to federally-back direct loans as well as private student lending, which made up for about 25 percent of all student loans and often come with higher interest rates.

The rule of thumb has always been that graduates with bachelor degrees makes on average a million dollars more than those with just a diploma.  However, the million you’re suppose to make is off-set by the reality of a, on average, $46,700 four-year cost of tuition (including fees, books, room and board) at a public school and $99,900 at a private institution (you know, your Harvards, Yales and most HBCUs).  And while the median income for a worker, who is fortunate enough to get a job in this economy, with a bachelor’s degree is around $46k, you have to remember that average college grads don’t pull even that with the average high school grads income level until age 33.

It’s no wonder that the default rate climbed to 7.2 percent in 2009 (that rate is almost three times as much at for-profit universities). In an effort to give kids a chance in the workforce, especially when many jobs are now requiring at least a two-year degree, families are borrowing more than they can afford to pay back their loans and are being penalized severely for it.

Earlier this year, President Obama signed into law several loan reform programs, which would add more money to Pell Grants, legislate the caps of future graduates annual payment at 10 percent of their income and eliminate fees paid to private banks to act as intermediaries in providing loans. Currently, Congress is weighing legislation to allow borrowers to wipe out private student loans in bankruptcy, which currently can only be discharged through the impossible task of proving “undue hardship.”

But this might not be enough to help the thousands of graduates such as myself, who are trying to keep ahead of the debt. Is student loan debt the next financial bubble to burst?  All indicators are suggesting that it’s almost certain that student loan debt will go the way of the housing market.

And while there is no easy fix for the student loan crisis in this current structure, a combination of across the board caps in college costs plus an expansive student loan forgiveness program for those of us, whom are already out in the workforce, could go along way from keeping this from happening.

If we can bail out the banks, than we can forgive graduates of their student loan debts. And while you can foreclose on a house, repo a car, you can’t take back an education.