STUDY: 70% Of College Grads Will Never Pay Off their Student Loans


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Andrew Follett Energy and Science Reporter
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More than two-thirds of British college graduates will never pay off their student loans, according to research from the Institute for Fiscal Studies (IFS).

UK policy was making it easy for college graduates to avoid fully repaying their student loans, the study found, since large amounts of student debt is simply written off if loans aren’t repaid in 30 years.

“These new findings add to concerns the current policy of lending large sums to students to pay for their degree – rather than funding universities directly – is not sustainable over the long-term,” Andrew Gunn, a higher education researcher involved in the study at the University of Leeds, wrote in The Conversation Friday.

When graduates earn over $27,000 annually, they start making repayments of 9 percent of their salary above that threshold. However, if the loan isn’t repaid within 30 years, the outstanding balance is simply written off allowing for large numbers of student to get out of paying for their degree.

Gunn blames low loan repayment rates on bad government policy and the fact that more young people are entering college than ever before, effectively devaluing a degree. This creates a vicious circle where graduates earn less, making it harder to pay off loans. Simultaneously, it causes the price price of college to increase, meaning more student have to borrow large amounts of money they’re incapable of paying off.

“In recent years students have taken on ever-larger loans – and this, combined with rising interest rates, is making it more expensive for graduates and undermining confidence in the system,” Gunn wrote. “As the IFS reports, this has hit poorer students and middle-earning graduates the hardest.”

Approximately 44 million Americans are in student debt to the total of $1.31 trillion, according to a February report from the Federal Reserve Bank of New York. To put that figure in perspective, U.S. student loan debt accounts for roughly the same amount of money as the entire Russian economy and Americans owe more on their student loans then they do on credit cards.

The average debt level for currently enrolled students in is $11,475, according to a May survey by TD Ameritrade.

Roughly half of U.S. college students think that the government will forgive their student loans, even though it only writes off portions of about 10 percent of college debt. In order to qualify for student loan forgiveness programs, borrowers have to hold specifically-identified public service jobs for a long period of time, die or become permanently disabled.

President Donald Trump proposed that “students should not be asked to pay more on the debt than they can afford,” when attending a campaign rally last October. Trump’s solution was to “cap repayment for an affordable portion of the borrower’s income,” at “12.5 percent” for roughly 15 years before the debt is forgiven.

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