Labor

Grads With Lower Levels Of Debt Are The Ones More Likely To Default

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Students with $5,000 or less of federally backed student loans defaulted within three years of leaving college, according to a White House report.

Roughly 30 percent of students who had between $5,000 and $10,000 in loans defaulted and around 18 percent of those with between $10,000 and $20,000 defaulted within three years of leaving school.

What is also surprising is that those with the highest levels of student debt defaulted at a much lower rate. Of those students with in excess of $40,000 in loans, just 4 percent defaulted on their debt.

Students with under $10,000 in loans comprise roughly two-thirds of student loan defaults, reports the White House.

Those with lower levels of debt comprise a much greater portion of overall borrowers, and therefore is a far greater probability that you will see more defaults from the large group. Also, borrowers with high debt burdens often have earned graduate and advanced degrees and thus have a greater likelihood of getting a job with a high salary.

Another important thing to note, the White House finds, is that those with relatively small amounts of student loans “are often an indication that a borrower didn’t complete their program.” With no degree and student debt, it is likely that they “may struggle to get a job that pays decently enough to repay their loans.”

Many have suggested possible solutions to this student debt problem. One such solution would be to enroll students in programs that allow them to make payments tied to their income-levels. Another proposition is to increase state funding for education to lower tuition costs for universities and for students.

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