By: Alvin Wilson Staff Writer
Many students today are only able to attend college with the help of student loans. But what would happen if the students borrowing that money weren’t able to pay it back?
According to a recent article published by the Wall Street Journal, more than 40 percent of people with student loans are either behind on payments or have received permission to postpone payments.
Roughly 16 percent of those people have defaulted on their student loans, meaning they have gone at least 270 days without making a payment.
John Leadley, professor of economics at Western, is critical of the numbers in the article because of the nature of student loans. Because of this, he said the percentages may be inflated.
“When you say there’s a high percentage of people who aren’t paying, that’s going to be a higher percentage than it is for virtually any other kind of loan,” said Leadley. “These are loans that they never take off the books.”
Unlike other kinds of loans, Leadley said, student loans don’t disappear.
“If you have a car loan and you stop paying, at some point they’re just going to write it off,” he said. “They’re going to recover what they can by taking back your car, and that loan is now history. If you declare bankruptcy, that loan can be wiped out. Student loans never go away.”
Leadley said that the accumulated bad history of student loans, which goes back much further than the history of other loans, can inflate the number.
Something else that inflates the number is the prevalence of predatory lending in for-profit institutions.
According to a report by the Brookings Institution, an organization that reports on economic activity, 13 of the 25 institutions where students hold the most debt are for-profit.
“What you hear the most about in the news are these student loans from for-profit institutions,” said Leadley. “If you’re applying for a student loan, the lender doesn’t ask if it makes sense for you in any way.”
Leadley said he thinks the predatory lending habits of for-profit institutions contribute to the problem.
“Part of it is the for-profit side seeing this as money for them, and not really caring if the student is ever going to get a job to pay it back,” he said. “If I’m lending money, and the federal government guarantees that I’ll get my money back if the student defaults, what incentive do I have to check?”
Western has one of the lower student loan default rates for Oregon universities, according to Collegemeasures.org, coming in at 6.1 percent. That puts us between University of Oregon (4.4 percent) and Southern Oregon University (8.7 percent). We’re a long way from being in danger.
Leadley still thinks Western students should start looking at loans in a way that reduces their odds of being in the 43 percent of non-payers.
“If I was a student, I would want to ask myself what the implications of taking out that much debt for my degree are,” said Leadly. “Get good career and academic advising. Do research about potential salaries. Ask yourself what your loan payments might be like. Take those things into consideration.”
Contact the author at awilson15@wou.edu or on Twitter @awilsonjournal.
