Graduates struggle to repay loans

As the economy continues to slide and the job market for freshly minted graduates becomes rougher, paying off student loan debt has become a struggle for many - and experts anticipate the problem will continue in the coming years.

The average university student graduates with about $19,000 in loan debt, according to the Project on Student Debt, a nonprofit independent research and policy organization dedicated to analyzing trends and repercussions of student loans and debt, and experts say, as a result, students need to look beyond college and consider what they are going to do about their finances post-graduation.

"Today's tough economic times make high student loan payments even harder to bear," said Robert Shireman, the executive director for the Project. "Student debt levels are rising year after year, and starting salaries have not kept up. Now more than ever, students need information and counseling about all their options when they're deciding how to pay for college and how to repay their loans."

But the options available to students may be dwindling. In the past, there has always been a built-in security net for those who can not make their payments: loan rehabilitation.

Loan rehabilitation gives borrowers who have defaulted on their student loans - because of lost jobs or hard economic times - an opportunity to get back on their feet. If a borrower consistently makes on-time payments for a given amount of time, they are then deemed ready for "rehabilitation," in which a new lender buys back a borrower's old loan and their credit is returned to as it was before the borrower took out the loan.

However, the country's worsening economic situation has annihilated the market which buys back existing student loans. And though many steps are in the works to support the student loan market, there have been no measures taken to repair the market for rehabilitated loans.

As of December, SunTrust Banks - a lender that had been buying back many nearly rehabilitated loans - ceased doing so. This left many borrowers who qualify for rehabilitation with no means of wiping their credit records clean.

Many national experts on student finances agree this is a problem that will affect not just those who currently qualify for rehabilitation, but also students who currently have loans or who are looking to take out loans to finance the rising costs of higher education.

"This is a problem that is going to continue," said Edie Irons, a spokeswoman for the Project on Student Debt. "Because with this economic climate, the biggest single issue facing students may just be making their payments."

Irons went on to say that students having trouble making payments on their loans should consolidate as much as possible and try to stay away from "riskier" and "more expensive" private loans that are not subject to federal assistance and "should be used only as a last resort."

But students said they often have little choice between the two.

"I have both federal and private loans," sophomore criminal justice and criminology major Kevin Mawyer said. "You can't just get the federal ones because they have caps on [the amount they will lend] and for some people, that's not enough. I'm about $26,000 in debt now; I'm working two jobs to help pay some of it off, but ultimately, the loans are all in my name."

Alan Collinge, author and founder of Student Loan Justice - an organization that advocates the passage of a Student Borrower Bill of Rights to increase transparency and accountability in the government's loan agencies - pointed out that Mawyer is not alone. More students have turned to student loans as a standard way to finance their education in recent years than ever before.

"Thirty years ago, student loans barely existed," Collinge said. "Today, the average undergraduate borrower leaves school with $23,000 in student loan debt. As a nation, we owe, collectively, about $600 billion in student loan debt."

Collinge and other advocates insist the problem is not the lack of rehabilitation resources, but rather the very foundation of the student loan system.

"The federal government has, over the past eight years, proven to be, at best, dysfunctional, and at worst, inexcusably corrupt in their oversight of the student loan system," Collinge said. "Both House and Senate Education Committee members must pass legislation that restores standard consumer protections to student loans ... [and] universities have been jacking their tuition at double the rate of inflation for over three decades. They have to reverse this, and lower their tuition and fees dramatically."

In July, the federal government will introduce an income-based repayment to graduates attempting to pay off their loan debts. This plan will base monthly payment plans off an individual's income in an attempt to make repayment easier for recent graduates.

In the meantime, Irons advised students to bear in mind that "there is help out there," and to not let their debt get away from them.

But in the end, students said more needs to be done to help those struggling to afford the high prices and expenses of higher education before they have to resort to taking out loans.

"I think the whole thing is ridiculous," Mawyer said. "College students are going to come out thousands of dollars in debt, just because they're trying to get an education? No, that needs to change."

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