$1.2 trillion in college debt hurts economy

The $1.2 trillion college debt crisis is crippling students, parents and the economy, writes Christopher Denhart on the College Affordability blog.

Two-thirds of college graduates have some debt, Denhart writes.  The average borrower will graduate $26,600 in the red, according to the The Institute for College Access and Success (TICAS) Project on Student Debt. One in 10 graduates owe more than $40,000.

Student debt now totals $1.2 trillion, 6 percent of the overall national debt.

. . . national debt carries many consequences including slowing economic growth (translating into fewer jobs being created) and rising interest rates.  Capital will not be as easy to access.

The majority of student loans are backed by the U.S. government through banks like Sallie Mae, or since 2010, by the Department of Education.  Translation: the creditor in this scenario is the U.S. tax payer, who if students default on these loans will be subject to carry the burden of these loans.

Community college students are borrowing too, writes Denhart. Thirty-eight percent of community college graduates in 2008 had student loans. The average debt load at a public two-year institution is $7,000.

One community college, Henry Ford Community College in Dearborn, Mich., is offering a one-time student debt amnesty program that will allow students who owed a balance prior to or including the winter 2012 semester to afford to return to the college. The program “offers the opportunity for students to pay 50% of what is owed on their account to settle their debt with the College.”  Will this become a norm within the two-year degree space as more and more debt is accumulated?

“With more and more emphasis being placed on college education for all, raising costs of an already expensive degree, and underemployment of college graduates running rampant, student loan debt is a problem that will cripple economic possibilities and success to come,” Denhart concludes.

‘Pell runner’ losses force tuition hike

With a budget deficit made worse by student abuse of Pell GrantsHenry Ford Community College (Michigan) will raise tuition by 7 percent, reports the Press and Guide. The college will have to pay back $9.5 million in federal dollars — about 20 percent of tuition revenue — because many Pell recipients dropped out or failed all their classes after collecting up to $5,550 in student aid.

Collecting from “Pell runners” — students who stop attending once they get their grant money — rarely is successful, President Gail Mee said after the board meeting.

Trustee Aimee Schoelles asked if the college could see if the students have unpaid tuition bills from other colleges — a sign they are milking the system at one school and then moving to the next.

Mee said a federal registry tracks students who misuse their loans, but the data is too old to be useful.

Schoelles also suggested looking at class data to see where students drop or never attend and then overenrolling those courses so when students withdraw or never show the class is still closer to full.

Looking only at first-time, degree-seeking students, HFCC has the lowest graduation rate — 9 percent — of Michigan’s 18 community colleges; a third of students transfer before earning a degree.