Most households are still struggling to recover from the financial crisis that ballooned into what is now known as the Great Recession, but some analysts are predicting that a new financial crisis looming on the horizon – this time involving student loan debt. Many are comparing it to the subprime mortgage mess that led to the housing crisis, which in turn triggered the recession.
Student Loan Debt Reaches a Historic High
Over the last decade, the percentage of U.S. households with student debt has been steadily rising and recently climbed to historic levels with almost 20 percent of households holding educational loans. While student load debt doesn’t pose the same threat to the overall economic system that the housing crisis did, it still has the power to hold back the overall economic recovery as young adults grapple with heavy financial burdens.
Not only is student debt growing, but the number of loans that are behind in payments is also growing. According to Forbes.com, 12.4% of student loans that were issued before the financial crisis (between 2005 and 2007) are 90 days past due while 15.1% of loans issued between 2010 and 2012 are at least 90 days late in payment – an increase in the delinquency rate of nearly 22%.
Young adults need strategies to help them handle student debt and cope with the payments. For working adults, loan payments consume a significant portion of their take-home pay. For those who are unemployed, loans often end up going into deferment or forbearance, where they often accrue interest, making them even harder to pay back down the road.
Schools Look to Online Courses to Reduce Tuition Expense
Some schools have risen to the challenge of reducing student loan amounts by offering online classes with lower tuition rates than campus-based classes. In addition, online courses often allow students to finish degree programs sooner, resulting in less overall debt. Several states are looking at specially designed online programs that are specifically geared towards offering lower cost education options.
One such initiative is taking place in California at San Diego State University. The pilot program will consist of three entry-level courses at $150 each, compared to $620 for classroom-based courses. The three courses were selected since they are in high demand and are “gateway courses” that are needed to move into the next sequence of courses. The program will initially target high school students, “waitlisted” community college students, members of the armed forces and veterans.
Online Education is on the Rise
With advances in technology and increased demand for flexible education options, it’s no surprise that online education is growing. In fact, according to U.S. News & World Report, this is the ninth straight year that the number of college students enrolled in at least one online course has increased. While growth has slowed somewhat over the last year, it still far surpasses the growth of higher education overall.
Online course selection and educational quality are also on the rise, contributing to the continued increase in enrollments. Online education has become a key component of most colleges and universities, including many highly respected institutions. With more than 65 percent of all chief academic officers stating that online education is critical to their institution’s long-term strategy, online offerings should continue to grow both in number and quality.
Turning to Online Courses Can Help Students Save Money
Students can use online education programs to significantly reduce their tuition expenses and related student loans. While some online courses are less expensive than their classroom-based counterparts, like the program in San Diego, the real savings may not be tuition-related. Living expenses associated with attending classes on campus can be a significant cost. Dormitory and cafeteria fees for on-campus housing or rent, utilities, and groceries for off-campus housing add up quickly.
Attending a campus-based program may also mean that students have to relocate across the state or even across the country. Once there, daily commuting costs and parking fees continue to add to the list of expenses. Students may also incur other fees including materials fees and technology surcharges.
Attending an online program allows students to continue to live at home and attend class from anywhere, eliminating expenses related to room and board, relocation, and commuting. In addition, the flexibility makes it more practical for students to work and go to school so they rely less on loans to finance their education. Often, online programs make it easier for students to schedule a full credit load which means they can complete their degree sooner. Even better, many schools offer lower tuition rates for full time students, resulting in potentially thousands of dollars in savings each year.
Julian is a young entrepreneur as well as a benefactor of online education. Through http://www.businessadministrationinformation.com, he provides informative articles on various online finance degree programs, curriculum, and educational requirements.
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Category: Money Basics