Grads Struggle with College Debt, Don’t Understand Their Loans
Posted By Candace Talmadge on September 26, 2016 at 5:15 pm
Peter Boucher never imagined he would end up as a bartender in Reston, Va., staring at about $80,000 in of debt from student loans. He graduated in 2012 from West Virginia University with a bachelor’s science degree in horticulture.
Boucher, 27, would like to join the Peace Corps because in his field, that experience is a career booster. But he simply cannot afford to do so. His monthly student loan payment is $649 and he would not be able to get a deferment during his time in the corps, which does not pay. “It feels like I’m handcuffed to this loan,” he says. “I can’t take any risks.”
Candice Tucker, 24, is an associate at a public relations firm in New York City. She graduated in 2015 from Rowan University with a bachelor’s degree in public relations and has $60,000 in student loan debt. “It’s depressing when you see that number,” she says.
Her monthly payment is only $30, but she negotiated a lower amount when she was unemployed and expects it will rise soon. She said the biggest burden of so much debt is psychological, although the high cost of living in New York makes paying off her college loans more challenging.
Cara Jesperen, 34, works in product management for a healthcare IT company. She also has $80,000 in student loans after earning a bachelor’s degree in family studies and an MBA. She kept her monthly payment at $800 to budget for her other living expenses, but that comes with a tradeoff. “I’m very discouraged by how long it will take me to pay it off and how much will go toward interest.”
All three grads struggle, like many of their peers, with their situations.
Why grads struggle: Lack of counseling
All three say that they either did not receive any counseling about the financial consequences of their loans, or the reality did not sink until later in college or after they graduated.
“When you’re in school, it feels very abstract and far off, so it’s easy to accept,” Jesperen explains. “It’s in the years following, when you start to think about larger investments, like a mortgage, that you are reminded of the albatross of student loan debt hanging over you.”
Her comments are in line with preliminary findings from the Employer-Provided Student Loan Benefits Survey 2016 from IonTuition. The student loan management firm conducted an online survey of 2,712 employees who had taken out loans to pay for their higher education and found that grads struggle with repayment and blame a lack of information.
More than 50 percent of survey respondents claimed that they did not receive counseling before accepting the terms of their loans. The federal government requires entrance counseling in order to borrow any federal student loan as an undergraduate or graduate/professional student.
Other survey findings include:
- Sixty percent of those polled believe their student loan payments are (or were) too high and 44 percent are unaware of their student loan interest rate. Furthermore, more than one in three (35.6 percent) feel that they lack an understanding of their student loan repayment options.
- Nearly 60 percent (59.6 percent) of those who report feeling unprepared to pay back their loans are also unaware of their options if they are unable to afford their payments. As a result, close to 60 percent (57.8 percent) of respondents believe it would be beneficial if their employer provided information and online tools to assist with student loan management.
- In fact, almost half (48.4 percent) of all respondents said they would use a hotline to learn about income-driven repayment, while nearly two-thirds (64.1 percent said that one-on-one student loan counseling would be valuable.
- Nearly half (47 percent) of respondents believe that they would qualify for private student loan refinancing, yet just 46.8 percent have a credit score above 680. This makes them ineligible for most re-finance programs that an employer can offer.
- Fourteen percent of respondents have no idea what their credit score is and nearly one-fifth (19.2 percent) are not sure if their score is regarded as good or not.
Help from employers?
Boucher, Tucker and Jespersen all were eager to receive tuition repayment help from their employers, but only about 4 percent of U.S. companies provide such assistance, up 1 percentage point from 2015, according to the Society for Human Resource Management.
“We’ve found that companies in the service sector are most receptive to the idea of launching a student loan matching program,” says Greg Stallkamp, strategic adviser at GradFin. “In particular, the idea has gained traction with financial services companies, as they seek to lure millennial employees and reduce turnover.”
In a student loan matching program, the employer pays a portion of the employee’s student loan debt on a monthly basis. The combined payments from employer and employee expedite the repayment schedule.
Going forward, Stallkamp said industry consultants expect this figure to increase substantially, which could mean grads struggle a little less. Willis Towers Watson estimates that by 2018, the number of companies offering a student loan matching program for employees will grow nearly 20 percent.