Students at New York colleges and universities are significantly less likely than those in other states to default on their student loans, according to a study by the U.S. Department of Education.
The study found that 8% of students at New York postsecondary schools who were scheduled to begin paying their loans in 2013 were in default by the third year of repayment. New York’s default rate was the sixth-lowest in the nation.
The overall U.S. default rate was 11.3%. (See the default rates for all 50 states.)
The study looked at more than 6,000 postsecondary schools in the nation and 401 in New York, including private, public and proprietary (for-profit) schools. Among the largest in the state by enrollment, default rates were:
- Suffolk County Community College: 9%.
- Excelsior College: 3.9%.
- University at Buffalo: 3.1%.
- Syracuse University: 3%.
- New York University: 1.9%.
(Click here to search the federal database for default statistics by school, city or state.)
Nationwide, public community colleges had an average default rate for 2013 of 18.5%, and proprietary schools were at 15%. For four-year public colleges, the average rate was 7.3%, and for four-year private colleges it was 6.5%.
The default rates for community colleges, vocational schools and for-profit colleges tend to be higher because former students are less likely to have completed their studies or see a boost in earnings, and often can’t keep up with loan payments, according to a report in the Brookings Papers on Economic Activity.
The new report provides a detailed look at default rates, but it may not show a complete picture of the debt burden on students. While the report takes a snapshot of borrowers who are within the first three-year window of their repayment phase, it doesn’t capture those who delay repayment until after the three-year measurement window expires.
Amherst advisor: Debt creates ‘difficult decisions’ after college
People with college degrees earn more, on average, than those with only a high school diploma. In 2014, the median income of young adults with a bachelor’s degree was $49,900, compared with $30,000 for people who completed high school, according to the National Center for Education Statistics.
However, excessive student loan debt is a major burden for many Americans. It can significantly hamper people’s finances by increasing their overall debt burden and cutting into money they could use for mortgages, retirement and other long-term investments. Total student loan debt was $1.36 trillion as of June, according to the Federal Reserve Board, up from $961 billion in 2011.
We asked Amherst, New York-based financial advisor Steven Elwell about how families can integrate student loans into their financial lives.
How can students and families make sure their loans are a good investment in their future?
Families and students can make sure loans are a good investment by doing the appropriate research on selecting a major. This is especially important because switching majors several times can mean you’ll need more semesters to finish your degree, which adds cost.
Also, students can focus on getting good grades and taking advantage of the networks the school provides. Often, networking at school-sponsored events leads to the student’s first job out of college.
How does taking out student loans potentially affect students’ future financial lives?
Taking out loans to pay for school will result in a monthly payment after you graduate. This payment can affect your ability to work toward other financial goals, such as saving for an emergency fund, a down payment on a house or retirement. Typically, the loan will have a 10- to 12-year payoff schedule, so it can have an impact on your ability to reach your other goals for a long time.
What should parents and students keep in mind when taking out student loans?
Keep in mind all the available options, starting with federal subsidized and unsubsidized loans and then moving on to private loans and parent PLUS loans. Be mindful of the interest rates, especially whether they are variable or fixed, and the payoff options each type of loan permits. Lastly, after graduation, investigate any loan forgiveness options that may be available.
What options exist to improve the terms of student loan debt?
First, take advantage of any auto-pay discounts a lender may provide, which may cut your interest rate by 0.25 percentage point. That can add up to a lot of money. Also, several financial companies have started offering student loan refinancing options. Look into their pros and cons — but before you refinance, investigate any loan forgiveness programs available for your federal loans. If you refinance to a private loan, you’ll lose access to those.
Are income-driven repayment plans a good option?
Income-driven repayment options can be good if you’re struggling with your monthly payment, but there are downsides. By having a lower payment, you’ll have to pay longer than the original schedule to pay off the loan. This means you’ll ultimately pay more in interest.
State student loan default ratesThe 50 states ranked from highest student loan default rate to lowest.
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