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Student loans can lead to additional consumer debt

A quick perusal of virtually any news site will reveal something that most Washington residents are already intimately familiar with -- the student loan crisis is still growing. With many jobs requiring a secondary education, students often have no choice but to take out loans in order to address the soaring costs of a college education. These loans have a significant impact on debtors and even lead to other forms of consumer debt.

While most college students graduate or leave school with some amount of student loans, one group of students is affected significantly more than others. Students of for-profit colleges and universities often carry more student debt and have more trouble repaying their loans. ITT technical colleges -- which were recently closed -- had the lowest repayment rate for three-year periods. An analysis from The Institute for College Access and Success discovered that less than half of all students had been able to pay even one dollar during that period. Conversely, community colleges have a 57 percent repayment rate for three-year periods, while public universities have a relatively high rate of 81 percent.

Federal repayment plans do exist for students with loans issued through the federal government, but they are often not available for those in the most need. The plan places a monthly cap on the percentage of a person's income that they can repay. However, individuals who have gone more than 270 days without making a payment are not eligible for the program.

For-profit colleges often have a greater concern for their bottom line instead of their student's financial well-being. Massive student loans can drive graduates to take on additional consumer debt in the form of credit cards and other loans in order to meet their daily necessities. While bankruptcy does not always discharge certain student loans, it can help Washington students create a more secure financial future by clearing away other debts.

Source: The Atlantic, "Understanding the Many Crises of Student Loans", Mikhail Zinshteyn, Sept. 27, 2016

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