Obama at University of Michigan, Ann Arbor on January 27,2012

Brief review of Obamas speech. Link to full transcript

During Obamas speech he told students that college graduates have half the unemployment rate of non-grads, and that their incomes are twice as high as those without a high school diploma. After some talk about the importance of growing industry and creating jobs in the United States he came back to the topic of college. He stated that the cost of college tuition and fees have nearly doubled during the lifetime of his audience members. He reported that federal student aid will be increased ,and mentioned  his recently announced program that will cap student loan payments at 10% of their monthly income.

Obama reminded students that interest rates on student loans are set to double in July, and  encouraged  his audience to contact members of Congress to protest the rate increase. Additionally  he said that he hopes Congress will double the number of work study jobs in the next five years.

He said that he is encouraging the states to make college more affordable, and that states will be rewarded for bringng down the cost of education and making it easier for more students to graduate. He announced a new program which he jokingly called  “know before you owe”  which will provide students more information to compare colleges and college costs.

Lets hope that you arent wondering if you are in default. It wont feel good and it doesnt look good on your credit report.  But the cold hard fact is that the default rate is about 9% nationwide. The default rate varies across the nation and also depends on the particular  school that you went to, and the type of school. Perhaps you have seen the stories on the news lately about how the default rate is much higher at schools that are “for profit”.

So, what is default ?  On a federal student loan:  Assuming that you are supposed to make monthly payments- you are in default if you havent made a payment in 270 days. There are some different options available to you if you think you may be going into default status. Call your lender and talk to them about your situation and see what you can work out. 

For more information about student loan default status, visit The Ombudsman website .

Bicycles at the University of Colorado – Denver. I visited this campus last October and I was really impressed with how the city of Denver incorporates bicycle lanes and routes through out the city. This makes getting around town easy and inexpensive for students. There are more than 400 miles of bike routes in Denver, and there are 40 miles of bike lanes. The downtown area features 600 bike racks to lock your bike and there are even places you can check out a bike and borrow it for the day. Click on the link to read more about bicycling in Denver

There are many differences between schools that operate without regard to profit as compared to those that operate for-profit.  One major difference is the student loan default rate.  According to figures from the Department of Education for the year 2009:  default rates at  for-profit schools were 15% compared to 4.6% at not-for-profit schools.  And nearly one half of the total defaults on student loans are from students that went to for-profit schools.  An article in the New York Times states   ”for-profit schools depend on federal student aid for more than 80 percent of their revenues”.

Students considering enrolling in  a for-profit school should carefully research the tuition cost, accreditation and the ability to transfer credit hours to other institutions.

Everyone knows that medical school can be expensive, and becoming a Doctor takes a few years.  But what happens if you borrow your way through medical school and then default on your student loans ? I just found an interesting  article on The Wall Street Journal  education page  about a medical school student that owed about $250,000 when she finished school in 2003.   After beginning her residency she did not make payments on her debt but went into deferrment status.  Then when she began making payments they were $1000 a month. In 2007 she went into default on her student loans  and with  the interest and penalties added into her debt, the amount due  swelled to $555,000.  The good news is that she was able to negotiate a repayment plan with her lenders  and should have the entire debt paid off in 351 months.

According to  an article from USA Today the default rate on federal student loans ranges from 15.96%  in Arizona to a low of  3.39% in North Dakota.  Behind Arizona, the states with the highest default rates  include Arkansas, Indiana, Iowa, Colorado, Oklahoma, Florida,Kentucky,Wyoming , Texas and Mississippi - all above 10% .  Click here  if you would like to take a look at the map and see how your state measures up.

There was an interesting article by Mary Umburger  in the Chicago Tribune  on December 30 about the massive student loan debt and the problems it is currently causing, and may cause in the future.  The article quotes the website FinAid.org, who says that the total student loan debt is growing at $2,800 per second. Thats right, per second. The article points out that student loan debt is causing young people to put off buying their first home. Mary writes  “The homeownership rate for people 25 to 29 is at its lowest level since 1999, and for 30- to 34-year-olds it’s the lowest rate in 17 years”.   She also states that  6 million  25-35 year olds are living with their parents.