Student loan debt–it’s one of the most pervasive concerns for young adults today. Approximately 44 million Americans have student loan debt–those Americans in total owe about $1.3 trillion. The average graduate of the Class of 2016 will hold $37,172 in student debt by the time they graduate. But how much do students actually know about the debt they’re taking on? A new survey conducted by LendEdu, a New Jersey-based company that calls itself the “Kayak of student lending” shows that they may not know that much.

One of the biggest revelations from LendEdu, which surveyed current college students, is that about half of college students surveyed think their loans will qualify for federal forgiveness after graduation–and most of them are probably wrong. In truth, there are very few ways to get your loans completely forgiven. One way is to go into public service work for a minimum of 10 years, but a relatively small percentage of the population follows that path. A few other (rare) ways that students manage to qualify for student loan forgiveness is by accepting certain teaching programs that place teachers in underserved areas, or if the university you attended shuts down while you’re a student or within 120 days after you graduate. For the record, death also qualifies someone for student loan forgiveness…but it’s probably safe to say that most students aren’t including that as a viable option when it comes to not paying back student loans.

Other questions on the survey indicated that the respondents don’t have a great handle on a few different aspects of student loans. According to the survey: “80 percent of college students could not identify the current interest rates on undergraduate federal subsidized and unsubsidized student loans.” Similarly, “79 percent of college students could not identify the current repayment term of a federal student loan” and “when asked, 64 percent of college students incorrectly believe that it is possible to refinance student loan debt with the federal government.”

This of course, isn’t to say that these are facts that all borrowers of student loans should have off the top of their heads. Student loans–from applying to paying back the debt–are complicated. But at the same time, it’s important to teach and encourage realistic expectations as student loan debt continues to grow.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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The Class of 2018 is having an exciting summer. They get to figure out which dorms they will live in, which intro classes they will take, and, most importantly, which loans they will take out to pay for the next four years. Meanwhile, the Class of 2014 is experiencing some discomfort as they figure out how exactly to pay for those loans they took out four summers ago. Student loans burden a reported 40 million Americans. Read on to learn all about how these people and their finances are impacted by politics.

What is a student loan?

A student loan is pretty self-explanatory. It is a type of loan specifically meant to pay for university tuition and all other costs associated with going to college. This can include books, computers, and housing. Student loans differ greatly from other types of loans. For example, federal student loans do not have to be paid back until graduation. People obtain student loans by filling out the Free Application for Federal Student Aid (FAFSA), a form that gives students access to all sorts of financial aid, including Pell Grants and Federal Work Study.

Who provides these student loans?

While some students obtain these loans from private banks, many of them obtain loans from the federal government. Federal loans are all backed and funded by the U.S. Department of Education (DOE), which means that the interest rate is often lower than those provided by a private bank.

What are some problems with the student loan system?

The big problem is that so many students need them. Twelve million students each year, 60 percent of all college students, pay some portion of their tuition with student loans. This is partly because college is more expensive than it used to be. Over the last 24 years, the average cost of in-state public college education rose by $5,470. And that’s just in-state public school. Tuition at some private institutions is staggering.

This contrast illustrates it best: the overall consumer price index has risen 115 percent since 1985. How high has the college education inflation rate risen? Nearly 500 percent. It’s no wonder that more Americans than ever have student loan debt. Here’s President Barack Obama decrying skyrocketing tuition:

Interest rates used to be a problem. In previous years, the interest rate on student loans would be set permanently by Congress. However, these rates were set up so that, unless Congress reauthorized them, they would double. There was a fight to keep these rates low in 2012 and 2013. That’s why this weird clip from Late Night With Jimmy Fallon with Obama exists:

Congress quickly realized that going through this battle every year was not good for anyone. That’s why they passed the Bipartisan Student Loan Certainty Act of 2013. This law tied student loans to the 10-year Treasury note and locked in individual rates for life. This means that, while your own rate will never rise, the rates of future students will raise independent of action from Congress.

The bigger problem is that student loans have saddled 37 million graduates with serious debt. It takes years, sometimes decades, to pay off these loans. Worse, these debts have been steadily rising over the past few decades.

Why does it take so long to pay back student loans?

Simply put, graduates just aren’t very good at paying these loans back. Somewhere between a quarter and a third of borrowers are late on their payments. According to the Federal Reserve Bank of New York, 35 percent of American student loan borrowers were delinquent on payments in the third quarter of 2012. This local news broadcast called the situation an “economic crisis.”

Graduating students are also struggling to pay back these loans because they are entering an awful job market. For example, 6.7 percent of students who graduated in 2008 were still unemployed in 2012. How are these young people expected to start paying down this debt when they have little or no income?

Many graduates also do not know how to correctly pay these loans back. This advice column from The New York Times shows just how complicated paying back student loans can be.

If so many graduates cannot quickly pay off their debts, they may be left out of certain opportunities, like buying a house. Student loan debt is a drag on the economy.

PBS NewsHour has more on that issue here:

What assistance is available to those with student loan debt?

Not much. Some politicians are attempting to reform the system to help graduates (we’ll get to that later), but there are only a few ways the government can currently help.

Loan consolidation is one such option. This is when the government lets you combine all of your loans into one. Graduates who are having trouble paying off multiple loans consider this option so that they can only have one manageable monthly payment. There are also some instances in which debt holders can defer their payments on principle and interest. Find out if your student loan payments can be deferred here.

Private companies exist that offer to help lower monthly payments, but these companies have recently come under fire from federal and state regulators for using predatory practices and charging graduates hefty upfront fees for services that the DOE offers for free. Illinois has sued some of these companies and more states are likely to follow.

In the past, those looking for forgiveness of their debt were out luck. Even today, graduates who want an immediate forgiveness of their debts will have trouble doing so. This table shows just how hard it is to get student loan debt forgiven. Even bankruptcy does not always result in a forgiveness of student debt. However, action taken by President Obama made forgiveness a little easier. Read on to the next section to find out how.

How is President Obama trying to fix student loans?

Obama has used his executive power to bypass Congress and expand the Pay As You Earn program. Pay As You Earn is a federal program that allows borrowers to cap their monthly payments at 10 percent of their income and forgives remaining debt after 20 years. This program was previously only available to new students. Obama expanded the program to a majority of loan holders, who can begin to take advantage of it in 2015.

Obama also supports the Bank on Students Emergency Loan Refinancing Act. This bill, introduced this May by Sen. Elizabeth Warren (D-MA), would allow those with outstanding debt to refinance their loans based on newer and lower interest rates.

What does Congress think about these reforms?

As noted in the last section, Democrats are on board with Warren’s plan. Every single Democratic Senator voted for the bill when it was brought to the Senate floor. This is most likely because it is a targeted demographic of the Democratic Party’s base — young adults — and that it is paid for by a tax that that has been a part of their platform for years.

Republicans in Congress are not a fan of Warren’s bill, mainly because it would be funded by the Buffett Rule. The Buffett Rule, proposed by Obama before the 2012 election, is a plan to tax millionaires so that they are not paying a lower share of their wealth in taxes compared to middle-class Americans. Even Senate Republicans, often seen as more moderate than House Republicans, rejected the bill, calling it a “political stunt.” Only three Republicans voted for the bill.

Sen. Marco Rubio (R-FL), a possible 2016 candidate, has introduced a bill that looks nearly identical to the Pay As You Earn program, but applies the same logic to every single student loan. It caps payments as a percentage of income and allows for debt forgiveness. However, while Pay As You Earn forgives all debt after 20 years, Rubio’s bill would only forgive that debt if it were less than $57,500. The debt would be forgiven in 30 years if it were any higher than that figure. Still, there is a lot of common ground between conservatives and Democrats. Common sense would dictate that this bill has a real chance of being passed.

Yet, as those who follow Congress know all too well, common sense rarely impacts Congressional results. The main obstacle for Rubio’s reform bill is that not all conservatives are the same. There are significant divisions in the Republican party on this issue. Many conservatives do not even believe that the federal government should be in the business of paying for young people to go to college. When asked about his vote against Warren’s bill, Senate Majority Leader Mitch McConnell (R-KY) stated that it is not Congress’ job to forgive “obligations that have been voluntarily incurred.” He also said “not everybody needs to go to Yale,” presumably arguing that students who cannot afford college should look for cheaper options instead of depending on the government. There are certainly cheaper options than Yale, such as for-profit college. McConnell believes that students should consider these less-expensive options before depending on the government.

How do Americans feel about student loan reform?

There has not been much polling done on the issue of student loan reform; however, one 2013 Public Policy Polling poll shows that all Americans are unsurprisingly unified on one issue: 83 percent of all Americans want Congress to either keep rates on student loans the way they are or lower them. This poll was taken back when rates could have potentially doubled, so it does not reflect feelings toward current reform packages, but it does show that the American people are in favor of Congress acting to keep interest rates low.

Americans are much more divided when it comes to opinions on the worthiness of their own loans. A poll by the National Foundation for Credit Counseling shows that, by a two-to-one margin, most Americans believe that their own student loan was worth the cost. However, most would not recommend taking out student loans to finance an education and some claimed they would not have taken a loan out if they were aware of how much it would cost them in the long run.

Congress would be wise to spend time on this issue, regardless of which reform plan they support. According to a Harvard University Institute of Politics poll, 57 percent of Millennials believe that student debt is a major problem. That concern is consistent across party lines. This statistic will likely keep the student loan issue on the Congressional agenda for quite some time.

Resources

Primary

U.S. Senate: S 1241 The Bipartisan Student Loan Certainty Act

Additional

U.S. Department of Education: FAFSA

College Board: Average Net Price Over Time for Full-Time Students at Public Four-Year Institutions

Forbes: College Costs Out of Control

Huffington Post: Elizabeth Warren Slams Mitch McConnell: He Wants ‘Students to Dream a Little Smaller’

U.S. News & World Report: Congress Approves Student Loan Deal

Huffington Post: How Millennials and Students Won a Massive Victory on Loan Rates

Huffington Post: Why the Student Loan Deal is Bad News for Students

Vox: 2008 Was a Terrible Year to Graduate College

The New York Times: A Beginner’s Guide to Repaying Student Loans

U.S. News & World Report: Obama Sidesteps Congress to Expand Student Loan Repayment Program

CBS: Senate Republicans Block Consideration of Student Loan Bill

Eric Essagof

Eric Essagof attended The George Washington University majoring in Political Science. He writes about how decisions made in DC impact the rest of the country. He is a Twitter addict, hip-hop fan, and intramural sports referee in his spare time. Contact Eric at staff@LawStreetMedia.com.

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As part of the ongoing debate about the value of law school in the current market, Brittany Alzfan tells you why now is the time to go. For the flip side, check out Matt DeWilde’s take on why you shouldn’t send in that application just yet.

Now is a good time to go to law school, because things are looking up for future lawyers. Now I know most of you are skeptical, especially given the latest job statistics for the class of 2013, but just hear me out here. While the numbers put out by the National Association for Law Placement revealed a lower employment rate for the sixth year running, there was some good news: law school graduates in 2013 found more jobs overall than in 2012. That means that students who enter law school now will probably have more potential jobs at their disposal.

The huge drop in students enrolling in law schools over the past several years leaves graduates looking at a surprisingly strong job market. Let’s use the class of 2016 as an example here–39,700 students enrolled in the fall of 2013. If we take into account that about ten percent of each law school class generally drops out, then we are looking at no more than 36,000 J.D. graduates in 2016.

Compare that number to the 46,776 graduates in 2013, and we see a drop of 23 percent. With significantly less competition amongst the graduating class, graduates are far more likely to secure a decent job.

Does this mean that I’m saying that every law graduate will go on to work in the legal field right out of graduation? No, of course not. Like in every other field, some complete their degrees and pursue other things anyways. Many J.D. graduates end up pursuing careers in finance or business.

But the numbers can’t be ignored here. According to statistics put out by the American Bar Association, 32,755 graduates from last year’s class found full-time, long-term work lasting more than a year. Of those, 26,337 jobs required passing the bar, meaning that they were typical legal jobs that required a law degree. Another 4,714 students secured jobs in fields that did not require a law degree, but preferred to hire J.D.s, such as NGO organizers or congressional staffers. Lastly, 1,724 graduates ended up in jobs that were completely unrelated to the legal field.

If these numbers remain relatively steady, then we can expect that about 91 percent of the class of 2016 will find long-term, full-time employment. This is significantly higher than the 72 percent of graduates that found full-time employment last year. If we break this down further, about 73 percent of graduates will be in full-time legal positions, compared to only 58 percent last year.

This debate is pretty entrenched–some experts agree with me, others say the risk is still not worth the expensive price of a legal education. Kyle McEntee, the founder of the nonprofit Law School Transparency, said, “I do expect that the employment rates are going to improve greatly.” The issue is whether or not these job opportunities are worth the three years, and over $100,000 that it takes to graduate from law school.

Even when they do find jobs, law school graduates have to face the unfortunate fact that while starting salaries have fallen, debt is way up. Median pay right out of law school has dropped to around $62,000 a year from $72,000 in 2008. When you take inflation into account, starting salaries are actually lower than they were in 2000. On top of this, the New America Foundation estimates that the median student who borrows for law school–and most of them do borrow–finishes school with $128,000 in loans to pay back.

Yet, despite the cost of tuition and resulting debt, there is evidence that law school may be a smart financial decision in the long run. Michael Simkovic, a Seton Hall law professor, published a paper last year that showed that even for graduates at the 25th percentile of pay–such as those in jobs at small law firms or as public servants–law school was still a profitable investment, even if they spent $60,000 a year on tuition. In addition, President Obama has just announced a plan designed to alleviate student loan debt. His “Loan Forgiveness” plan is set up so that students with loans who meet certain income eligibility standards will only need to pay back 10 percent of their discretionary income for a maximum of 20 years. In some instances, if you work in public service, such as in a public defender’s job, you only need to pay back loans for 10 years. After that, the rest is forgiven. So if debt is what’s holding you back from law school, loan forgiveness might be an excellent option for you.

Now, of course, law school is not for everyone. It shouldn’t be a fallback if you don’t know what to do with the rest of your life, nor is it something that should be chosen on a whim. It’s hard work, and without passion, you probably won’t succeed. Additionally, some programs are not worth the cost. Most graduates from bottom-tier law schools will continue to have little success in the job market, just like they always have. Employers are more likely to hire a past graduate that has struggled to find a job than hire someone from a failing institution. It is important to do your research when applying, and ultimately deciding whether or not to attend, law school.

However, if you have thought it through and have decided that law school is for you, then your future is looking bright.

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Brittany Alzfan (@BrittanyAlzfan) is a student at the George Washington University majoring in Criminal Justice. She was a member of Law Street’s founding Law School Rankings team during the summer of 2014. Contact Brittany at staff@LawStreetMedia.com.

Featured image courtesy of [Penn State via Flickr]

Brittany Alzfan

Brittany Alzfan is a student at the George Washington University majoring in Criminal Justice. She was a member of Law Street’s founding Law School Rankings team during the summer of 2014. Contact Brittany at staff@LawStreetMedia.com.

The post If You Want to Go to Law School, Now’s the Time to Apply appeared first on Law Street.