Like many borrowers, Halid Hamade, 28, is set to benefit – at least somewhat – from student loan forgiveness.

After President Joe Biden announced he would forgive $10,000 in federal education debt and up to $20,000 for Pell Grant recipients who meet the income threshold, Hamade said he was happy.

Still, “it’s not enough,” he said.

Hamade currently owes the university about $100,000 in federal and private loans. He is also one of the nearly 40 million students without a degree to show for this debt.

The economics major was about to graduate in 2016, but ran out of funds in his final year of school, he said. Hamade said he was denied an additional loan, which made it nearly impossible to stay enrolled at Penn State University. “It was out of my hands at the time.”

Instead, Hamade quit school and completed Merit America’s Computer Support Professional Certificate program, which took less than four months. He now works as an integration engineer based in Washington, DC

Halid Hamade

Source: Merit America

Dropouts face heavier financial burdens

For students who start college and don’t finish, managing student loans without the benefit of a degree — and the higher earning potential that comes with it — is especially difficult.

The default rate among borrowers who leave with student debt but without a degree is three times higher than that of borrowers who have a degree.

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About 39 million Americans have attended college at some point but have not graduated, according to a report by the National Student Clearinghouse Research Center.

Although college completion rates are on the rise, only about 63% of students enrolled in four-year institutions graduate within six years, the National Center for Education Statistics also found.

Among students leaving college, most said it was due to a loss of motivation or a life change, according to a separate report from education lender Sallie Mae. Others cite financial problems, followed by mental health issues.

“Often the dropouts are first-generation students from underserved communities,” said Rick Castellano, spokesman for Sallie Mae.

Those who complete college are more likely to grow up in higher-income households and have at least one parent who has a college degree, the report found.

Completers are also better prepared when it comes to paying for college: 42% said they had a plan to pay for each year of college before enrolling, while only 26% of dropouts could say as much. (Other studies show that students are more likely to enroll in college when they are aware of the financial resources available to help pay.)

“Having a plan to pay for college or having those conversations earlier goes a long way,” Castellano said.

Forgiving is not ‘taking on the biggest problem’

On the heels of Biden’s historic student loan cancellation announcement, colleges still face a bigger affordability crisis, experts say.

“That’s what worries me,” said Hafeez Lakhani, founder and president of education-focused Lakhani Coaching in New York City. “When I heard about the loan forgiveness, I thought it was misdirected.”

“You’re not addressing the biggest issue in front of us, which is declining enrollment,” he said. “The decline in enrollment is absolutely related to affordability.”

Tuition and average fees increased slightly again in the 2021-2022 academic year, reaching $10,740 for in-state students in four-year public schools, according to the College Board, which follows trends in college pricing and student aid. The average tuition and fees at four-year private institutions reached $38,070.

This year, some colleges are raising tuition by up to 5%, citing inflation and other rising costs.

Most students need to borrow to cover at least part of the tab. More than 40 million Americans now owe a collective student debt of $1.7 trillion, a balance that has tripled since the Great Recession.

Amid rising tuition fees, growing student loan burdens, and increased demand for workers, students like Hamade are increasingly choosing alternative career paths over four-year colleges. according to studies.

Yet studies show that college graduates will earn nearly a million dollars more over their careers, and many continue to believe that earning a degree is worth it in the end.

If he could do it all over again, Hamade said he would try to get his degree but would do it cheaper.

“If I was 18 right now, I would go to community college and get an undergraduate degree the cheapest way possible,” Hamade said.

“I always see it as a way for people to move on,” he added.

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