Will You End Up with Student Loan Debt and No Degree? – Detroit Free Press

Nearly 38% of the respondents who dropped out said they did so because of family troubles. Family was a driving force especially among women. About 43% of women who started college but left gave family duties as the reason. Will you end up with student loan debt and no degree?

When thinking about college debt, the big worry tends to be: will a paycheck follow the college diploma? And will that job cover everyday bills, as well as monthly student loan payments?

But as the high school graduation celebrations wind down and the borrowing for college heats up, the real question to ask should be: Will I end up with a big bunch of debt and no degree?

A new report on the economic well-being of U.S. households gives an interesting glimpse on student loans and the challenges facing families.

The Federal Reserve survey noted that 23% of adults currently have some education debt. In that group, about 15% had such debt for their own education; 6% had education debt for a spouse or partner; and 6% had college debt for their child’s or grandchild’s education.

More tidbits:

Students who took on debt but didn’t complete any degree are more likely to end up behind on student loan payments.

About 16% of borrowers who did not complete any degree or certificate report being behind on payments, according to a survey released in May by the Federal Reserve Board. It jumps to 21% of those who have no degree and are no longer enrolled in the program for which they borrowed.

By contrast, 6% of borrowers who completed an associate degree report being behind on their student loan payments. The percentage drops to 4% for this who completed a bachelor’s degree, according to the Fed report on household financial well-being.

First-generation college students and those who attended for-profit colleges find things particularly tough.

The survey showed that 16% of borrowers who attended for-profit institutions said they were behind on student loan payments, compared with 6% of students who attended a public institution.

The study noted that students attending for-profit institutions are disproportionately likely to be first-generation college students or minority students and are less likely to complete a degree.

The Consumer Financial Protection Bureau has sued some for-profit chains in the past for predatory lending practices.

The most frequent reason given for dropping out tends to be family obligations.

Nearly 38% of the respondents who dropped out said they did so because of family troubles. Family was a driving force especially among women. About 43% of women who started college but left gave family duties as the reason.

But students had other reasons for starting college but not getting a degree.

About 27% said they did not complete a degree because they wanted to work.

About 24% said college was too expensive so they did not complete a degree.

One in four or 25% said they were simply not interested in college or continuing college and did not complete a degree.

Not surprisingly, the study concludes: “One factor that is clearly associated with delinquency is failure to complete the degree for which the debt was incurred.”

Mark Kantrowitz, a college debt expert and senior vice president and publisher for Edvisors.com, said students who drop out of college are four times more likely to default than students who graduate and they represent 63% of defaults.

Default is defined as 360 days of non-payment on federal education loans.

Perhaps, a contributing factor is that some students who drop out do not go through exit counseling, which reviews repayment options, or take advantage of those options.

Exit counseling is required when students graduate, leave school or drop below half-time enrollment. But sometimes that’s done online.

Some freshmen who drop out could have $5,500 in student loans. Some sophomores who drop out could have more than $11,000 in student loans, based on some estimates.

Chris Dlugozima, community educator for the GreenPath Financial Wellness office in White Plains, N.Y., said it’s important that students realize that being 30 days late or more on student loan payments can drive down credit scores.

If someone has a private student loan, he or she should talk to the loan servicer and see what repayment options exist. In general, private loans have few repayment options and can lead to more repayment problems.

“With private loans, it’s completely case by case but many lenders will offer forbearance options,” Dlugozima said.

“It’s always worth a phone call.”

As part of a forbearance, a lender could allow you to delay or reduce payments but interest would continue to build. Typically, you’d continue paying the interest charges during a forbearance.

You’d need to submit an application to request a forbearance.

Victoria Scavone, assistant vice president, Enrollment & Student Services at Walsh College in Troy, said borrowers can look into income-driven repayment plans on their federal loans if they’re underemployed after graduation or end up leaving school without a degree.

Keith Williams, associate director of financial aid at Michigan State University, said students don’t realize their repayment options if they do not take advantage of exit counseling when they drop out of school.

Even if a student has to leave because of family obligations, Williams said, they may qualify for some breaks due to an economic hardship.

Economic hardship deferment is available for up to 36 months.

“The key is to stay in contact with your servicer,” Williams said.

Students who drop out should contact a college’s financial aid office.

Students don’t have to make payments based on a standard repayment plan for federal student loans where the monthly payments are higher. Instead, they can study some other options at www.studentloans.gov.