Dropouts face loan dangers
Think the college student graduating with a load of debt has a problem?
Consider this: Not every college student graduates, and — outliers like Bill Gates and Steve Jobs notwithstanding — college dropouts tend to make way less than their cohorts with diplomas. To make matters worse, many of them are saddled with significant amounts of debt.
LendEDU, a private firm that connects students and their families with student loans and loan refinancing, in October surveyed 1,000 students who dropped out of college owing money and found that the average tab came to a whopping $13,930.
Of these indebted dropouts, 53 percent are currently making no payments, 35 percent haven’t made any payments since dropping out, and 47 percent are already in default.
Not surprisingly, more than 70 percent of those surveyed say they regret quitting college, and 64 percent are considering re-enrolling, with the bulk of those expressing the belief that they could have paid their debt faster had they been able to obtain a degree.
“If you don’t get that degree, the picture gets very bleak,“says Nate Matherson, LendEDU cofounder and CEO. “Student loans are a very unique product in that you can’t declare them in bankruptcy.
“It’s definitely possible for students who drop out to pay back their loans,“he adds. “It’s just harder.”
Nine out of 10 student loans come under some form of government sponsorship or guarantee, and most of those outstanding charge about 6.8 percent interest, a figure that can be knocked down to an average 4.82 percent, says Matherson.
“The bottom line is, regardless of your circumstances, there’s a payment plan for a Direct Federal Loan that you should be able to afford unless you’re a deadbeat,” he says. “The people who are in trouble are the people who stick their head in the sand and don’t call their loan servicer and find out what their options are.”