Will the cost of a college education lead to Bankruptcy?

DEBT The Price of a COLLEGE EDUCATION As mounting student loan debt shatters the wallets of more and more Americans. bankruptcy has become increasingly prevalent. Over $1 trillion in student debt has caused lawmakers to second-guess how educational loans are handled. In this infographic. you'll learn about student loan debt and the strain it puts on the students who borrow. [1] How COSTLY IS A COLLEGE EDUCATION?" Public. four-year The average tuition fee for a four-year private university is universities cost on average $28,500 A YEAR." $8,240 A YEAR." [5] [5] Those from ages 18 to 24 spend around of students drop out 7.2% 1 of college due to financial problems. of their income on debt 30% obligations though it was nearly half that just 10 years ago. $4,100 by the time they graduate college. On average. undergrad students have: $3,173 in credit card debt and How ARE WE PAYING FOR IT? How the Typical Middle-Income Family Pays for College $3,443 $25,000 $2,966 $3,210 $2,639 $20,000 $1,695 $1,522 $5,319 $7,149 $6,315 $15,000 $2,101 $2,461 $2,332 $10.000 $885 $1,750 $757 $5,000 $4.417 $5,186 $7,211 17% 16% 15% 23% 34% 25% 10% 11% 7% 5% 8% 4% 12% 11% 11% 31% 31% 30% AY 2008-9 AY 2009-10 AY 2010-11 STUDENT PARENT PARENT INCOME STUDENT INCOME FRIENDS GRANTS BORROWING BORROWING E SAVINGS E SAVINGS E RELATIVES E SCHOLARSHIPS Over are worried that loan rates will 1 OUT OF EVERY 4 PARENTS mmediately enrollin school increase if their kids don't Students tend to borrow a great deal of money from various sources. % of Families Who Borrow Average Amount 30% $6,983 FEDERAL STUDENT LOANS 9% $6,358 PRIVATE EDUCATION LOANS 5% $1,357 STUDENT CREDIT LOANS 4% $5,437 OTHER STUDENT LOANS Thousands 0 THE GOVERNMENT'S ROLER The government's consumer credit is strictly student loans. 400 350 300 250 200 150 100 50 Sep-03 May-05 Jan-07 Sep-08 May-10 Jan-12 GOVERNMENT OWNED CONSUMER CREDIT STUDENT LOANS Due to a bill in 1998. students can no longer get federal student loans discharged during bankruptcy unless they can prove "UNDUE HARDSHIP." In 2005. private student loans were given the same restrictions. The majority of bankruptcy attorneys agree that this undue hardship is nearly impossible to prove in court. [4] PROSPECTIVE CHANGES IN STUDENT LOANS OF 2012 Income-Based Repayment 20 YEARS > of income-based repayment to have your loans forgiven. Currently requires Provisions in the Student Loan Forgiveness Act would cut that down to 10 YEARS. Pell Grant Drops $5,550 > and families can only make $23.000 a year to qualify The full Pell Grant is That's down from the previous $32.000 threshold of years before. Affordability Those who graduate with a bachelor's degree earn on average 70% more in their lifetimes On average. the cost of tuition and fees for a four-year public college or university has in > RISEN BY 33% the past 5 years. Informative Borrowing X Many student financial aid letters neglect to differentiate between loans and grants. Though credit cards, mortgages. car loans, and 401(k) plans all require the borrower to be informed. THIS ISN'T THE CASE for student loans. The Consumer Financial Protection Bureau has created a FINANCIAL AID LETTER TEMPLATE that would allow students and their parents to easily compare financial aid offers, though it's optional to use. STUDENT LOAN FORGIVENESS ACT This piece of legislation would Keep federal loan interest rates at Only require people who take out student loans to 10% of their income 3.4% INDEFINITELY. make payments based on Allow former students to have their DEBT DISMISSED AFTER 5 YEARS if they're part of the Public Service Loan Forgiveness program. Give borrowers the chance to reconsolidate private loans into federal owned loans. CONCLUSION Both parents and students have felt the STRAIN OF BEING IN DEBT FROM EDUCATION. Though some changes to legislation could help in the coming years, many are still in fear of their financial aid debts. Many are hopeful that the Student Loan Forgiveness Act will help alleviate some of the pain from student loans. Ttotal bankruptcy Sources [1] http://www.credit.com/press/statistics/student-credit-and-debt-statistics html (2] https://wwwl.salliemae.com/NR/rdonlyres/BAF36839-4913–456E-8883- ACDO06B950A5/14952/HowAmericaPaysfor College_2011.pdf [3] http://www.ritholtz.com/blog/2012/05/consumer-credit-worse-than-you-think/ [4] http://www.usatoday.com/money/perfi/college/story/2012-05-21/solutions-to -student-loan-crisis/55117944/1 [5] https://bigfuture.collegeboard .org/pay-for-college/college-costs/college-costs-faqs Funding Source Share Average Amounts