College Dropout Loan Debt

A new problem that has arisen is an increase in the number of people with college debt but no degree to show for it, with student debt now topping $1 billion. Nearly 30% of college students who took out loans dropped out. Fewer than 25% of students did so ten years ago, according to Education Sector. 

College dropouts are also the most likely to default on their loans, falling behind four times more often than graduates. Obama's administration is trying to address the issue by coupling its goal of ensuring that high school students are prepared for at least one year of higher education with new targets for college graduation rates.

The poor economy has forced more students to decide between the benefits of a degree and the burden of paying for it. More students are now taking on jobs or taking a reduced course load to save money, which also increases the likelihood that they will not graduate. In a 2009 study, half of college dropouts said that work was a major factor in their decision. Only one fourth said they had spent too much time socializing.

Although college dropouts make more than those with only a high school diploma, they earn about a million dollars less than college graduates over their careers. College enrollment has increased by 38% in the past decade to more than 20 million, according to government data.

However, lawmakers and regulators have recently shown more concern over the growing market of for-profit institutions with low graduation rates and high student debt. FinAid.org reports that students who receive a bachelor's degree from a for-profit college will have an average debt of over $41,000. Students graduating from a public university have roughly half that amount of debt. For-profit colleges also saw the biggest increase in borrowers who drop out.

The Education Trust found that more than half of students who take out loans to enroll in two-year for-profit colleges never finish. At traditional non-profit and public colleges, only approximately 20% of students with loans who started college in 2003 dropped out within six years. By comparison, about 8% of Americans between ages 16 and 24 do not have a high school diploma.

The Obama administration has made increasing the college graduation rate by 2020 one of its top educational priorities. Some schools have also tried to streamline majors and course offerings to help students stay on track. Education experts say many students aren't prepared for the more rigorous course work in college and that many schools don't offer enough guidance for these students.

As a reminder, student loans are generally not dischargeable in bankruptcy. However, if you are struggling with student loan debt, bankruptcy may be an option worth considering. Filing bankruptcy may allow you to eliminate many of your other debts, freeing up money to repay your student loans. Please feel free to leave any comments or questions.

Longer Unemployment Benefits Are Winding Down

Many out of work Americans are getting their last unemployment checks sooner than expected, even though Congress renewed extended unemployment benefits through the end of 2012. The checks are stopping for the long-term unemployed.  More than 5 million people have been out of work for more than 6 months.

Federal unemployment benefit extensions, which supplemented state payments for up to 99 weeks, were just intended to continue until the job market improved. Congress renewed the program in February when it was set to expire, but also phased in a reduction of the number of weeks of extended aid and made it more difficult for states to qualify for the maximum aid. Since then people in 23 states have lost up to 5 months worth of benefits.

This month an additional 70,000 people will lose benefits earlier than expected, increasing the number of those cut off prematurely this year to nearly 500,000 according to the National Employment Law Project. That does not include those who exhausted the weeks of benefits they were entitled to.

Some states are also making it harder to qualify for the first few months of benefits, which are covered by taxes on employers. In Congress, Republicans say the unemployment benefits extension prolongs joblessness and has not kept unemployment rates down, while Democrats say those out of work have few alternatives and that the payments are one of the most effective forms of stimulus since most of it is immediately spent.

The benefits expiration is contributing to what economists refer to as a "fiscal cliff", or a drag on the economy at the end of this year when tax cuts and recession-related spending measures will end unless Congress acts. The Congressional Budget Office has warned that the combination could contribute to another recession next year.

Unemployment is lower than it was when the emergency unemployment extensions were put into action in November 2009. It is down to 8.1% from 9.9% then. However, it is still far higher than pre-recession norms and there are more than 3 job seekers for every opening.

Supporters of the extended benefits says the cuts are premature, while conservative economists and political leaders argue that unemployment benefits prolong joblessness and transfer wealth from one area of the economy to another without contributing to growth.

Most states offer 26 weeks of unemployment benefits, plus the federal extensions. The number of extra weeks in each state is determined by several factors, including the state's unemployment rate and whether it is higher than three years earlier.

Some states have also tightened eligibility. Most people nationwide can apply for benefits by phone. Nationally, 30% of applicants are rejected according to the National Employment Law Project. If you are unemployed and are unable to keep up with your debts, you may want to consider filing bankruptcy. I can help you file bankruptcy in Kansas or Missouri. I welcome any questions or comments you may have.