For many college seniors in Florida, the monumental moment of parading across the stage at graduation has been overshadowed by financial woes that await them after graduation.
Students are borrowing more money to cover the cost of college than ever before resulting in higher default rates than a year ago.
College seniors who graduated with student loans in 2010 owed an average of $25,250, according to a November press release by the Project on Student Debt of the Institute for College Access & Success. This is up 5 percent from the previous year.
Florida’s historically black colleges, community and for-profit colleges have higher default rates than traditional state universities, and the state is among the top 10 states for student default rates.
Adding to the financial burden, the declining U.S. economy has contributed to increases in college tuition, low graduation rates and dim job prospects.
“The tough economy we are living in now is a definite factor to the higher default rates,” said Jane Glickman, a U.S Department of Education press officer.
Glickman advises students to look into various repayment plans to avoid defaulting, including President Obama’s most recent proposal called
income-based repayment. This program will offer relief to students who have taken loans as of January 1, 2008.
Mark Kantrowitz, founder and publisher of FinAid.org and publisher of FastWeb.com, explained how the new plan affects students’ repayment.
“Income-based repayment bases your monthly payment on a percentage of your discretionary income as opposed to the amount you owe,” Kantrowitz said.
This change was passed by Congress and would go into effect on July 1, 2014, reducing the monthly payment by a third, from 15 to 10 percent.
Glickman said that this payment method will encourage students to choose public-sector careers such as teachers, firefighters and so on.
Students should still consider loans to supplement their education needs, according to federal officials.
“Despite this increase in student debt, no one questions that student loans are an important tool and a vital investment for students and the nation,” said U.S. Secretary of Education Arne Duncan at the annual Federal Student Aid Conference last month.
Duncan added that students with bachelor’s degrees on average earn about one million dollars more over their lifetime than students who have only obtained a high school diploma.
The Project on Student Debt website suggests loan tips for recent graduates that include staying up to date with your loans, staying in touch with your lender and choosing the right repayment plan.For more information about avoiding loan default, visit http://projectonstudentdebt.org.