Financial aid offices should consider alternative credit
The contrast between the need for higher education to pursue many skilled jobs and the massive debt accrued in the course of study is one of American society's harshest catch-22 situations. According to the New York Federal Reserve, student loan debt in the U.S. reached $1.38 trillion by the end of 2017's fourth quarter. Considering that the Pew Research Center found nearly 40 percent of Americans under 30 years old were affected by student debt in some form, that gargantuan trillion-dollar figure sadly isn't a big surprise.
"U.S. adults currently owe nearly $1.4 trillion in student loan debt."
Part of this undoubtedly lies with how financial aid is administered - educational institutions lending money in massive sums that become realistically untenable to pay back. We'll take a closer look at this issue and how alternative credit reporting may be able to help.
The struggle for financial security
Pew Research also noted the median debt figures for those with bachelors' and post-graduate degrees - $25,000 and $45,000, respectively. Approximately 21 percent of these borrowers (aged 25 to 39) work more than one job and classify themselves as "financially struggling." Also, 49 percent of borrowers with outstanding debt end up believing their degree wasn't worth its ultimate cost.
A refreshed approach
The average American needs financing for college. But financial aid offices must reconsider how they assess loan applicants - in terms of who they do and don't lend to. Awarding loans with interest rates or principals to students who can't realistically repay them in any reasonable time frame is ultimately a lose-lose situation.
Amending the loan application process to include alternative credit data could be a major turning point for bursar's offices. They'll have a more comprehensive picture of applicants' ability to repay debt. Also, students who might not look great on paper via FICO scoring can have an opportunity to showcase their financial responsibility.