Tuesday, October 22, 2013

Literature Review #3


DiMaria, F. (2004, Jan 26). Student loans: Perceptions and realities. The Hispanic Outlook in Higher Education, 14, 33. Retrieved from http://search.proquest.com/docview/219290950?accountid=13626
The article begins by explaining that it is analyzing two surveys on debt. It continues to state that the vast majority of students believe they could not have gone to college without loans. The following section is about the average debt of students by the time they finished their secondary and postsecondary education. The next section is about the results of a survey studying how the percentage of income dedicated to paying student debt impacts an individual’s financial discomfort. The article then goes on to discuss credit card debt and its additional impact on paying off student loans. The following section is about the surveyed individuals’ opinions on their loans and how worth it they were. Even though there appears to be a correlation between high payment-income ratios and later home ownership, they state that this is due to age. 

Frank DiMaria writes for, The Hispanic Outlook in Higher Education, a journal that is mainly focused on the Hispanic perspective in higher education. He has published many articles on the subject for them.

Key terms:
payment-to-income ratios - the percentage of income that is dedicated to paying student loans
perceived burden - how difficult paying back loans the borrower considers making payments to be

"What we tried to do in the report is determine at what percent of your income do you feel an increased level of burden. At 2 percent to 7 percent the burden was about the same. But when you get to 8 percent, that's sort of a break point, then around the 12 percent point you start to feel that sort of next level of impact. And then again around 17 percent, then we did 20 percent or greater,"
This escalation of income being drained into student loans shows how the increase in percentage of income impacts the individual on a personal level. The fact that student loans could even reach 20 percent of an individual's income shows how drastically student debt can affect borrowers.

"O'Malley says that one must also consider a graduate's additional debt and income level. Graduates, she says, could probably comfortably spend 20 percent of their income on student loan debt if they are "living at home with mom and dad, not paying them any rent and they're buying the food, and you don't have any car payments. For those who have incurred a large amount of debt above their student loan debt, whether during their years in school or after graduation, "the student loan payment begins to interfere more with your lifestyle and other payments because in some people's minds it represents something that's getting in the way of being able to spend on something else.""
This statement shows that on the high end of payments, the only good way to allocate that much money to student loans is to not move out from their parents' house. This is not an option for many, and prevents heavy borrowers from establishing themselves in a residence of their own immediately after graduation.

"Forty-one percent who did not receive debt counseling were less likely to feel that borrowing had been worthwhile than the others, with 26 percent of those who had not been counseled about debt indicating it was not worth borrowing to increase career opportunities, compared to 14 percent of the others."
This supports my theory that education about borrowing and loan management are important influences on the borrower's experience with loans.

Value: This article presents the opinions of many individuals on how loans have affected them, giving data from the borrowers instead of just about them. This information also gives me evidence for my theory about proper education about student loans being important for responsible decision making on loans.

Literature Review #2

Visual : this is the picture on the cover of the report
The report begins with statistics on delinquency and defaults in different groups of individuals, separated by type of school, graduation, and use of government aid in loan repayment. It then quickly explains what delinquency and default are, in addition to describing the lack of data previously available on delinquency. It then explains that deferment and forbearance allow many to prevent delinquency or defaulting. The next section of the report explains the types of loans that are often taken, and the effects of defaulting, delinquency, forbearance, and deferment. There is a section specifically on the financial consequences of delinquency. The following section categorises borrowers by age, school type, and repayment results in detail. There is a separate section about the lack of knowledge in borrowers. The following section is about the impacts of delinquency. The report ends with more avenues of research that would shed more light on the problems facing individuals taking out loans.
Cunningham, Alisa F., and Gregory S. Kienzel. Delinquency: The Untold Story of Student Loan Borrowing. Rep. Institute for Higher Education Policy, Mar. 2011. Web. 21 Oct. 2013. <http://www.asa.org/pdfs/corporate/delinquency_the_untold_story.pdf>.
Alisa F. Cunningham and Gregory S. Kienzel have both published many reports on demographics of college loan borrowers for the Institute for Higher Education Policy, an institution that does research on higher education to allow legislature to be made based on current information to make higher education more available to people.
Key Terms:
Delinquency - failure to make monthly payments within 60 days of the due date
Default - exceeding 270 days in delinquency
Forbearance and deferment - provisions designed to allow borrowers to put off paying their loans
"The fact that some borrowers are able to avoid delinquency by using deferment, forbearance, or other repayment options indicates that the system is working for them. It seems likely that more borrowers could be using those tools." Pg 10
This statement supports my theory that borrowers are not educated about how to manage their loans.
"Borrowers default for a number of reasons, from unemployment to illness to failure to file deferment or forbearance requests on time to simply refusing to meet their financial obligations. The penalties for default are severe: Loan payments can be deducted from a borrower’s wages, income tax refunds can be withheld, or the account can be turned over for collection. In addition, default has longer-term impacts on students’ credit ratings and eligibility for student aid." Pg 14
This only summarizes information, but this information is important to the concept of why people default, and how serious the repercussions of defaulting are.
"About 37 percent of borrowers were repaying their loans without taking any mitigating actions, representing almost 667,000 borrowers in 2005 with nearly $13.1 billion in loans." Pg 18
This figure represents an incredibly low number, far less than half, that are capable of paying back their loans in the manner intended. This point is strong evidence for the cost of debt being higher than the benefits given by higher education.
This paper gives a lot of raw data about student loans, which gives me a basis to support my arguments. It also gives some opinions of the authors which give possible avenues of research.

Blog Post #4: Research Proposal

Daniel Coogan
Professor Goeller
Research in Disciplines: College!
Research Proposal  

Is the Reward of College Worth the Risk of Debt?

With the increasing cost of college and the reduction in the amount of the cost per student covered by the government, individual student loans have become the main method of paying for college. Even with the increasing reliance on student loans, many borrowers are still not truly aware of how their loans work or in some cases, how much they will have to pay off in the end. The lack of information given to students taking loans results in a generation of borrowers who don’t even understand how much debt they are taking on, going on the blind assumption that they will be able to pay it back after finishing a college education. However the number of borrowers who do not easily pay off their loans is not as low as many think.

Research Question:
If individuals were properly educated about the true costs of college and how often individuals have issues paying off those costs, would they still find the benefits of higher education to outweigh those costs.

Theoretical Frame:
I theorize that the information given to many students is not sufficient for them to make truly educated decisions on the costs versus the benefits of college. I believe that the actual information on loans and borrowers ability to pay them back is not presented to the individuals that it directly impacts.  While the concept of costs versus benefits of college are important to this paper, the main theory I intend to present is that the education of borrowers is insufficient for them to make responsible decisions regarding student loans and their choice of school for higher education.

Research Plan:
The obvious questions presented are, “Are borrowers presented with enough information to make educated decisions?”, “What are the possible risks of taking out large loans?”, and “Are the benefits of a college education worth these risks?”. One avenue of research is finding information on the amount of borrowers who have difficulties paying their loans back and sources that describe information that would allow borrowers to make more responsible decisions regarding loans. Another avenue of further research would be finding information on programs that attempt to educate them on the risks involved. A possible avenue of research is investigating if schools themselves educate their students about the impact of these loans.

Research Blog #3: Privatization

Privatization has increased the cost of higher education, while the number of individuals attending college has risen faster than government aid can keep up. This causes student loans to be taken more often as a primary way to pay for college. However, many are not aware of the actual costs that will result in these loans. The workings of the loans that students take out are also a mystery for many, but not all. As stated on page 10 of, Delinquency: The Untold Story of Student Loan Borrowing, "The fact that some borrowers are able to avoid delinquency by using deferment, forbearance, or other repayment options indicates that the system is working for them. It seems likely that more borrowers could be using those tools." The sad truth of this is evident to me in my own ignorance, even in my 5th year of college, of my student loans in that, I was not aware of what exactly words like delinquency, deferment, forbearance, and default meant before beginning my research.

Literature Review #1

Visual: I could not attach the intended picture, this is the image’s URL
The article begins by explaining many financial aid options offered by Sallie Mae, but continues by explaining how those aid packages do not allow an most individuals to attain a college education without accumulating debt. It goes on to explain briefly how debt is differentially accumulated by income class. This is followed by an explanation of the different types of loans that are commonly taken out and explains that even with aid and the best loan options, more loans are usually necessary. It then goes into defaulting on loans, and how to avoid it. The final section is about loans and their effects on taxpayers. It explains two types of loans, their benefits, and why both are used. An explanation about the drawbacks of privatized loans backed by the government follows this. The article finishes with a summary of the hazards of college loans.
Martinez, T. P., & Martinez, A. P. (2006, Jan 30). Reality-based college loans; present programs insure lenders, not students. The Hispanic Outlook in Higher Education, 16, 28. Retrieved from http://search.proquest.com/docview/219295143?accountid=13626
The authors Tony Martinez and Alison Martinez have both written many papers on the subject of student loans and support their information with relevant studies and sources.
Key terms:
Financial Aid Package – This is a group of grants and scholarships given in this article by Sallie Mae, with the apparent intention of allowing individuals in financial need to acquire a college degree. However, it is explained that this is rarely enough financial aid.
PLUS Loans – This stands for Parent Loan for Undergraduate Students. The article states these are a very viable option for attaining financial aid, however it also explains that almost half of the individuals who can take them out do not know what they are.
Stafford Loans – The most common type of loan according to this article. The article also states that like many other financial aid options discussed, they do not provide enough to attend college.
A study released Nov. 1, 2005, shows that grants, loans and expected family contribution leave an average shortfall of $4,689 per year below the cost of attendance for students from families with $32,288 annual income or less. … Financial aid packages given to students from families with income up to $62,240 leave $3,600 of need unmet. A 2001 PIRG study by the same group showed that high-income students faced a shortfall of merely $400.” (28)
            This clearly illustrates the differing impact of student loans to pay for higher education.
Shireman understands why students hesitate to borrow. "The truth is, it is dangerous to borrow," he points out. "There is a danger that you won't complete your degree, or if you do complete your degree, you won't get the job that gives you the extra income to repay the loan.” (28)
            This clearly illustrates the risk involved in taking out a loan.
“Shireman warns that our heavy reliance on loans to finance postsecondary education influences individual students in ways that harm our whole economy and society. Heavy college debt dissuades graduates from much-needed but less lucrative careers in teaching, social work and religious service. College debt might delay marriage, family formation and home ownership. College debt makes it hard to save for retirement and for the education of the next generation.” (28)
            This explains some of the possible drawbacks to taking out loans to pay for college.

            This article explains much of the financial aid information that I will require as a basis to discuss the causes and possible effects of privatized college loans. It also gives a description of information about the Sallie Mae Corporation, giving specific examples instead of general information. The article also discusses income class differences in financial aid and accumulation of debt. In addition, the presentation of information about student loans in relation to both borrowers and taxpayers separately gives a comparison of perspectives relevant to my topic. In addition, the studies mentioned give possible additional sources for my research.

Tuesday, October 8, 2013

Research Blog #2: Scouting the Territory

After doing some research, i believe that the topic of ways to change the problems with student loans must also be included in the paper, or it would only be a question without an answer. In addition, much of the information that I have found is relevant to low income or Hispanic families, which should give me a comparison point for other ethnic groups. I have also found information relevant to the costs benefits of community college, which allows me to include this on a financial investment vs. potential benefit aspect. In addition, many of the sources i have found also include links to other websites that offer more information.

After further research, i have narrowed my topic to a question of "Is college still worth it for everyone?" in the respect of the lack of information on the risk of debt accumulation vs. the potential for gain with a degree.

Links to sources with information on this topic are:
a report containing statistics on delinquency and default rates by age and type of school attended

an article on the impact of debt on the quality of life

Monday, October 7, 2013

Research Blog #1: Topic Idea

I plan to do my final project on student loans. Possibly the causes and effects of private loans. If i can find information on it, i plan to include the difference in impact on different groups. I also intend to include the differences in causes and effects of loans between public and private college students. I intend to find other relevant topics during my research to add to these.