With student loan debt rising at alarming rates, some college grads are forced into the workplace for income, rather than being able to take a gap year to serve others.
This year, Mennonite Voluntary Service began offering student loan assistance grants to ease some of the financial strain for grads who have outstanding loans.
While participants serve, they can defer their loan payments. A $5,000 grant from the Fidella E. Plett Charitable Foundation will help 13 participants in 2015 make monthly loan payments after they have completed their service commitment. The scholarships range from $500 to $1,000. Excess funds from the MVS units were also used to help fund the scholarships.
“Student loans are a big issue and they affect people’s ability to serve,” said Nathan Penner, director of MVS. “When we e-mailed participants and let them know that this was a possibility, they were really jazzed.”
MVS is a program of Mennonite Mission Network, where volunteers serve one- to three-year terms, live in intentional community, and work in a wide range of fields. To apply for the student loan grant, participants submitted the amount of their student loan debt. The amount owed of those who applied averaged $31,350.
“The hope is that the money we give covers at least one month of repayment, hopefully three,” Penner said. “What we’re doing is helping their transition back to repayment.”
According to the Institute for College Success and Access, student loan debt has increased by 84 percent from 2008 to 2014, to $1.19 trillion. About 70 percent of college graduates in 2013 had student loan debt averaging $28,400 per borrower. A former student who owes $30,000 would make payments of $300 to $400 per month for 10 years.
A recent Federal Reserve Bank of New York Report on Household Debt and Credit Developments indicates that payments that are 90 or more days past due are 11.5 percent of the $1.19 trillion dollars owed. Only half of the loans are in repayment status. The rest are deferred most likely because of hardship or because the borrowers have returned to school. This means the actual outstanding amount is 23 percent.
Former college students are typically required to begin repaying government-backed student loans six months after graduation or after they stop attending school. They can make monthly payments in proportion to their income. They can defer payments if they return to school or for 36 months because of financial hardship.
During their stint with MVS, participants will be considered to be in repayment status, Penner said.