Defaulting by Default

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The word default is an interesting word: It can mean the failure to do something or it can mean a situation or condition that prevails in the absence of some active intervention – a subtle but important distinction.

When you consider what’s happening with a growing number of college graduates in America and their ability – or perhaps more precisely their inability – to pay off their student loans, both of the previously-mentioned definitions of default seem to apply at the same time.

That is to say, at a time when tuition costs continually rise and jobs remain scarce, many students find themselves defaulting on their loans by default.

Changing that reality is one of the purposes behind Default: The Student Loan Documentary, an upcoming movie about America’s growing problem with debt from student loans.

In a style that seems inspired by filmmaker Michael Moore, creators of the Default documentary hope to use the production both to highlight and abate the stifling effects of student debt on America’s college graduates.

Youth Today recently got a “sneak peak” at a clip from the documentary. In it, Tamara Draut, vice president of policy and programs at Demos, a New York-based policy research and advocacy organization, speaks about how starting out with a five-figure student loan debt creates a host of problems.

After students pay their rents, car payments, car insurance and student loan payments, she says in the film clip, “there’s not going to be anything left over.”

“So there’s going to be very little cushion,” Draut says in the clip. “What happens a lot of times is those first years after college is a pretty significant buildup in credit card debt because credit cards become the way to bridge that gap between what you’re bringing in and what you have to pay out.”

So more students end up in more debt and become more vulnerable under what Draut refers to as America’s “debt-for-diploma” system, which she blames for helping to cause the overall decline in college education attainment in the United States.

“One of the things we’ve lost sight of is the problem it’s creating at the national level,” Draut says of America’s student loan system.

Support for that view is found within a newly-released report titled Student Debt and the Class of 2008, produced by the Project on Student Debt, an initiative of The Institute for College Access and Success, a Berkeley, Calif.-based college access organization. The project found that the national average debt for college graduates rose from $18,650 in 2004 to $23,200 in 2008, an increase of roughly 6 percent per year.

And more students are graduating with debt. According to the project, in 2007-2008, roughly two-thirds of students graduating from four-year colleges had student debt, compared with 58 percent of students who graduated in 1996, when the average debt was $13,200. Default rates are growing, too, having inched up from 5.2 percent in 2006 to 6.7 percent in 2007, according to the U.S. Department of Education.

It’s not as if this issue has been lost on the Obama Administration and the current U.S. Congress. Both the federal executive and legislative branches have been working to redesign America’s student loan system by having students borrow directly from the government. The money saved from this change would go to Pell grants, which are directed at the neediest students.

“This is a good start to solving the problem of rapidly growing student debt, but much more needs to be done – from reforming state and institutional aid policies to creating better incentives for colleges to restrain prices,” the Education Sector’s Kevin Carey said in a recent paper titled Drowning in Debt: The Emerging Student Loan Crisis.

The effort to retool America’s student loan system has recently been put on the backburner while Congress works on health care reform legislation. Perhaps the Default documentary will serve as a reminder of the fact that the student loan system still needs reform, too.

 

Problems with savings, too

 Question: The Sixth annual 529 Conference & Boot Camp was held in 2008, and the Seventh annual 529 Conference & Boot Camp will be held in 2010. Since the word “annual” means once per year, how can the seventh annual conference & boot camp take place in 2010 when the sixth annual  conference took place in 2008?

Answer: It’s the economy, stupid.

The Seventh annual 529 Conference & Boot Camp for 2009, which was supposed to take place in St. Louis this past fall, got cancelled because so many people said they couldn’t afford to go.

“We have received feedback from many of our regular attendees, telling us that budget pressure is forcing cutbacks, particularly in the areas of conference and travel expenses,” the conference sponsor explains on its web site, savingforcollege.com. “Our hope is that, with some fair winds behind us … we'll be back again, bigger and better in 2010.”

So now that 2010 is here, is the “bigger and better” Seventh annual 529 Conference & Boot Camp finally on?

Stay tuned. Savingforcollege.com, the organization that runs the annual 529 Conference & Boot Camp, said it is looking at possible dates of Oct. 19-22, 2010, and currently looking at the Boston area, the Washington, D.C., area and Florida as possible conference sites.

Final details are expected to be announced later this month.