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https://michaelrapparocklinca.com/understanding-the-depth-of-the-student-loan-crisis/

6/6/2022

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According to the DC think tank Bipartisan Policy Center, student loan debt has increased dramatically since 2007. In fact, more than 45 million people owe around $1.7 trillion in debt, and the likelihood of default is increasing. If this happens, the federal government is left on the hook. It is important to understand this crisis and how it impacts people, as well as how it can be repaired.

Greater Access to Student Loans
When more people have access to student loans, more people can get a college education. However, colleges and universities are aware of it and can raise their tuition. People aren’t likely to walk away from an overly expensive school because they can get the money to pay for it. The interest is the same for all students, no matter what their credit rating is, and these loans aren’t given based on an ability to repay.
State Support Has Declined
One of the reasons why student loan debt has increased is that state support for tuition and room and board has been declining for years. When there isn’t an option of grant money or other state assistance, students have little choice beyond borrowing the money. This has also led to an increase in student loan debt.
It’s Easy to Get a PLUS Loan
PLUS loans for undergraduate and graduate programs aren’t based on an ability to repay; they are based on the cost of tuition. These loans are available to parents who want to pay the tuition and other school costs. They have a higher interest rate than other federal loans, and they are too expensive for some to repay.
No Restrictions for Low-Quality Institutions
Unfortunately, poor-quality schools that are under performing have access to these loans. The problem is that if students are getting a subpar education, they will have a harder time getting a job. Then they will have a higher likelihood of defaulting on the loan. Institutional accountability could make a difference.

The bottom line is that the students and their parents need to assess the loan, its value, and their ability to repay.

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    Author

    Michael Rappa is a nationally recognized college-funding expert, and a Certified College Planning Specialist (CCPS) through the National Institute of Certified College Planners (NICCP). He is the president and founder of Ivy League Wealth Strategies, a fee based full service college and financial consulting firm covering all aspects of the college application and funding process. Since starting his local college funding practice, he has helped hundreds of parents send their children to college without spending their life’s savings or jeopardizing other important financial goals like a secure retirement. He is a firm believer that any parent, regardless of their background or financial circumstances, can send their child to college if they know how to play the financial aid game properly.

    He has earned the designation of Chartered Financial Consultant, ChFC® and Charter Life Underwriter, CLU®  Additionally, he earned his certification with
    distinction as an Independent Educational Consultant from UCLA. He is a member of the National College Advocacy Group

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