Billions of Dollars in Student Loan Default!! Why?
The United States of America has a student loan problem. The student loan program created with good intentions to help lower to middle income kids go to college has destroyed the lower to middle income families they were designed to help.
This data analysis project focuses on student loan default rate for people who entered repayment in 2014 and 2015 and were in default by June 2016. This analysis answers the following questions:
- The number of students that went into repayment from 2014 – 2015.
- The number of students that defaulted by June 2016
- The percentage of students who entered repayment in 2014/2015 but are now in default by June of 2016
- Top 10 states with the most student loan default rate
- Top 10 states that has the most amount of money in default for 8 months or more.
- The student loan default rate in each state
- The amount of money in default in each state
- The total amount of money in default for more than 8 months as of June 2016
- A United States geographical map to help with visualizing the data.
LET’S DIVE IN…
As of 2019, there are more student loan debt than car loans($1.3 trillion) and credit card debt($1.04 trillion). There currently are $1.52 trillion dollars in student loan debt spread across 42% of people who attended college. According to a research by the Federal Reserve System, 42% of people who attended college represents 30% of American adults. Out of this 42%, 20% of students are behind on their student loans as of 2017. 45 million Americans are suffering under the crushing weight of the student loan crisis.
The type of school you attended also determines if you are more or less likely to default on your student loans. 23% of people who attended private for-profit college default on their student loans. While 9% of people who attended public school and 6% of students from private non-profit school defaults on their student loans. With all these facts, it is not surprising that student loans has more default rate than mortgage and auto loans.
Another heartbreaking fact is that it takes the average person about 10-30 years to pay off student loans. This means that people are paying their student loans in the same amount of time it would take to pay off a mortgage. People are paying their student loans long after retirement, people are having their social security income garnished to pay for their student loans, people are having their paychecks and tax returns garnished for student loans. And, unlike other debt like a mortgage, credit card, or car loan, you cannot file for bankruptcy with a student loan.
Even people who work in public government jobs are promised that their student loans will be forgiven after 10 years of service to the government. As we can see with the recent debacle with Navient the student loan company, 99% of people who applied to have their student loans forgiven where rejected for one reason or the other. Even after they have worked for the government for 10 years or more and met all the requirements specified by the government promise of student loan forgiveness in exchange for service in the public sector. So, this means that even the government itself cannot help people escape their student loan crisis.
The Potential Cause
These alarming statistics begs the question: What could be causing the student loan crisis epidemic? A few theories:
- Rising cost of college tuition and college material like books. According to a research from credit.com, From 1971 to 2019, the cost of tuition has risen 145% year after year. This means that students have to take out more and more debt in order to pay for college expenses.
- The cost of living in particular states and cities. My hypothesis is that the state and city students attend school will have an impact on the amount of student loan they take on because students don’t just use student loans to pay for college tuition, they also use their student loans to cover living expenses. This amounts to rising number of student loans to cover the cost of living in a big city or big state. If you go to school in a city and state that is relatively cheap, then the amount of student loan that you have to take out to cover living expenses is much lower than someone attending school in a big city. This article by the chronicle of higher education shows just how higher cost of living can impact a student’s budget.
- Gullible young people and under-informed parents. This may sound unbelievable, but there are a lot of parents that encourage their kids to “take out as much loan as possible and get as many degrees as possible.” Such nonsensical advise typically come from ignorant parent who never had student loans or didn’t attend college and have no clue that the pop culture “take out a student loan, get the degree, and pay it back later when you get a job with your degree” is fluffy fake false advice. This advice could also emerge from parents who has tons of student loans but still believe the media infatuated mindset of “the school you go to is a determinant of success or taking out loans is the only way to attain higher education.” Such ungodly advice could also materialize itself from parents who went to school many years ago when you could pay for one year of college from your summer job.
They have no clue the emotional and mental trauma and stress and financial hardship they will experience in the future as a result of accumulating so much debt. So, when you have ignorant parents and ignorant kids, who are fed lies by pop culture media, then you’ve got yourself a perfect storm and a perfect combination of people who will sign the dotted line and collect massive amounts of student loans just to get a piece of paper that may or may not be useful in the future.
A research study by youthtruthsurvey.org explains how many students are actually prepared for college and the real world after college. These are students going into college without being fully aware of what’s ahead of them. And this research study shows how many students go to college and never finish because that is not what they want in life. These are students that took out college student loans but didn’t get the matching degree.
- Going to out of state school. When you are an out of state student, you are more likely to pay 2 to 3 times what in state students pay for college. It is always best to go to school in state to keep the cost of education low. This research shows just how out of state education can cost up to $10,000 or more per year vs in state education
- Going to a private for profit school. It is no secret that private for profit colleges are exactly what they sound like…”A complete Rip Off.” For profit colleges are wolves dressed like a dog. They seem friendly upfront and pretend their mission is to educate you, but everybody knows their true identity and reason for existence is to milk you money dry and bankrupt you if they can while simultaneously flourishing and filling their bank accounts with dough. You can find out more about how private colleges are ripping off unsuspecting victims in the book: Weapons of Math Destruction by Cath O’Neil.
I am sure there are many more reasons contributing to the student loan crisis, but the 5 reasons I listed above is enough to get the point across that we need to do something about the student loan crisis.
2016 Student Loan Default Rate Analysis.
Just to drive home this mindset that the student loan crisis needs to be stopped, we will explore student loan default rate data from the year 2016. The United States government makes student loan default rate data publicly available. I have analyzed the data from one of the student loan default rate datasets they provide.
The data in this dataset did not include the state of Alaska for an unknown reason. This dataset includes data from all 50 states including Washington DC and the Virgin Islands while excluding Alaska.
The result from this data set shows us that in the United States, 289,589 people entered student loan repayment between 2014 and 2015. Out of the 289,589 people, 33, 437 of them defaulted on their student loans by June 2016. That gives us a whopping 12% default rate. In addition to these students that defaulted by June 2016, by mid 2016 there were a total of 502,733 thousand people who has defaulted on their student loans for 8 months or more. So, exactly how much money does these 502,733 thousand people owe? The data shows that by June of 2016 there were $1,084,785,340 billion dollars that has been in default for 8 months or more.
Here is a quick summary of the 2016 student loan default rate data:
Now that you have seen the overall data for the whole United States for the year of 2016, let’s dive one level deeper and explore the data from a statewide perspective.
Top 10 states with the most student loan default rate in 2016.
Students who attended schools located in these top 10 states have the highest student loan default rate in 2016.
Top 10 states with the biggest amount of money in student loan default.
So, common sense logic might lead you to think that the states with the highest student loan default rate will also have the highest amount of money in default. But, the data says otherwise. This data below shows that the states with the highest student loan default rate is not the same states with the biggest amount of money in default. This graph shows the states with the highest amount of money in default as of June 2016.
These 2 graphs shows us that there is no correlation between the states with the highest student loan default rate and the states with the highest amount of student loan money in default. There might be a relationship between the cost of living in a state and the amount of student loan money the students in that state borrows and subsequently lead to higher amounts of money in default. This data shows us that states that we know have the highest cost of living also has the higher amounts of money in default.
Student loan default rate across the United states and Virgin Islands in 2016.
If the state you went to school didn’t make the top 10 but you still want to know the student loan default rate in your state, don’t worry, I have got the data to satisfy your hunger. The graph below shows the student loan default rate in each state of the United States excluding Alaska and including the Virgin Islands.
Amount of money in default for 240 days or more in each state for the year 2016.
So the state where you went to school didn’t make it in the top 10 of states with highest student loan default money? No worries! When you look at the graph below, you will see the amount of money that is in default for each state in the United States except Alaska and including the Virgin Islands.
Map for Visualization Purposes.
These two maps shows the student loan default rate and the amount of money in default by state in the year 2016. This map is the exact same data presented above, but in a visually geographical manner.
As you can see by the 2016 student loan default rate data analysis, we truly have a student loan crisis in our hands and it is time for us as a country to stand up and do something about it.
Let me know your thoughts about the student loan crisis in the comment section below.
- What do you think, do you believe we have a crisis at hand or is the student loan problem ok?
- What do you think we should do about the rising cost of education?
- What do you think is the solution to the student loan crisis?
- What other student loan data do you want me to explore?
- COMMENT BELOW AND LET ME KNOW YOUR THOUGHTS.