The number of student debt holders who default on their loans is declining, the U.S. Department of Education revealed recently. Of the borrowers who entered repayment between fiscal years 2012 and 2013, only 11.3% were classified as being in default. This figure was 11.8% the previous year and has been steadily declining since 2010, when 14.7% of debt holders defaulted on their loans.
Private schools, however, saw a slight increase in graduates’ default rates—the latest figure, 7.0%, was 0.2% higher than the previous year’s. More than 5.2 million debt holders from 6,155 schools entered repayment within the examined cohort, making the 11.3% who defaulted equivalent to nearly 600,000 individuals.
The Department of Education will forgive more than $170M of the debt amassed by students of the now-defunct Corinthian Colleges Inc., in the largest case in a recent series of fraud accusations against law schools. The 11,173 students involved in the case owed an average of $15,280 each. Before its downfall, Corinthian Colleges Inc. was one of the largest for-profit college chains in the country.
The Department of Education invoked an “obscure” law known as the “borrower defense,” which allows refunds for debt holders who can prove they were victims of fraud. The law was used to resolve this case, but whether it will prove appropriate for similar cases against other law schools remains to be seen.
Presidential candidate Hillary Clinton recently proposed a student debt deferral for start-up founders and their workers, suggesting that entrepreneurs and their first 10 to 20 employees should be allowed to wait up to three years to start paying back their loans. Clinton has continuously voiced her desire to ease student debt, but the latest suggestion is among her most detailed plans yet.
Clinton also proposed that those who launch “social enterprises that provide measurable social impact and benefit” or businesses in “distressed communities” could be forgiven for up to $17,500 in loans after five years. The agenda drew its share of criticism, as The Guardian reported that some doubted its fairness. “What about artists?,” one critic asked.
Once you have been accepted to your target MBA program, things start to move very quickly, and you will need to begin planning for your transition to business school right away. Understanding the financial realities of your MBA education is an important first step, and we have created this comprehensive, five-part “Mastering Your MBA Finances” series to help you do so. In this fifth and final installment of the series, we bring the revenue and expense pieces together to round out our sample MBA student budget. (Be sure to read Part 1, Part 2, Part 3, and Part 4 of this series if you have not done so already.)
For individualized advice, sign up for a free, 30-minute budget planning session with an M7 Financial budgeting coach.
In the earlier parts of this newsletter series, we discussed the income MBA students can generally expect to receive via their summer internship salary and signing bonus. We determined that an MBA candidate could anticipate approximately $43,000 in income during business school and that other potential income streams may also be available, which would need to be incorporated into one’s projected budget.
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