Student loan debt is a rising reality all across the country. Debt now totals more than $1 trillion for American students and, according to a newly released report, it’s being caused by low-income students at two-year community colleges and for-profit schools. For foster youth looking to pursue post-secondary education, the reality of student loans cannot be ignored.
To anyone attending a post-secondary institution, the cost of college is no surprise. The ever-escalating price tag is difficult to manage for any prospective student, and it’s especially hard if you don’t have an adult to help you through an undeniably complicated process.
This is the situation many foster youth find themselves dealing with as they apply for financial aid. And given the recently released report from The Brookings Institute, it’s critically important foster youth understand what they’re signing up for.
According to the report: “By 2011…borrowers at for-profit and 2-year institutions represented almost half of student-loan borrowers leaving school and starting to repay loans, and accounted for 70 percent of student loan defaults.”
These figures are alarming given the amount of foster youth who attend 2-year institutions, such as local community colleges.
Student Debt and Foster Youth: The Reality in NJ
In the 2014-15 academic year, 151 of 395 New Jersey Foster Care (NJFC) Scholars students (38%) attended 2-year community colleges and 43 (11%) attended vocational schools, according to Foster and Adoptive Family Services’ Director of Scholarships Millicent Barry. NJFC provides financial and educational assistance for eligible foster, adoptive and kinship youth in NJ.
Given that nearly 70 percent of student loan defaults come from students attending 2-year institutions and for-profit schools, it’s vital that foster youth understand the financial ramifications before they sign their name to a document.
Unfortunately, that’s not usually the case.
“Many former or current foster youth lack positive adult relationships that can be so crucial in navigating the real world,” Barry said. “From credit cards to renters’ rights, these youth at times are blindly making important decisions. Sometimes it is at no fault of their own, but just because they didn’t know what to look out for, the potential consequences of their actions, or what to take into consideration when making these adult decisions.”
Barry urges foster youth to take time and perform due diligence before making a big decision like choosing what college to attend.
“If a youth is ever unsure about why they are signing something or making a choice between different options given to them, please take a second to think about it! If possible they should sleep on the decision and try to find an adult they know to at least run the situation by for advice and insight,” Barry said. “Ask, “What does this mean? Will I have to do anything in the future about this? If I don’t do what is required, what are the consequences? Who do I contact if I have questions?” Bring the paperwork in question and try to understand as much as you can about the options before agreeing to anything!”
Student Debt and Foster Youth: The Consequences of Defaulting
In light of the new report, asking these questions and understanding the repercussions is all the more important. Whether a student defaults on a $50,000 loan or a $2,000, the consequences, including the hit staying on his credit report for seven years, remain the same.
This can be all the more devastating for a low-income borrower who is attempting to begin his life.
“It breaks our heart to hear a student whose school reports they have thousands of dollars in loans say they don’t have any,” Barry said. “Hopefully, with our intervention, as we educate NJFC Scholars on their loan amounts they are less at risk of defaulting on their loans and hurting their credit scores and their ability to live independently in the future. Understanding their financial situation can give them a better chance of an enriching and empowering life.”