Slashdot Mirror
U.S. Students/Grads Carrying Over $1 Trillion In Debt
An anonymous reader writes "Time reports that American students and grads were carrying $1.08 trillion in student loan debt at the end of 2013. This compares to just $253 billion a decade earlier. Aggregate debt grew 10% in the past year alone. 'By comparison, overall debt grew just 43% in the last decade and 1.6% over the past year.' About 70% of students graduate with some amount of debt, and the average amount owed is $29,400. 'Delinquencies on student loans have risen dramatically over the past decade: 11.5 percent of graduates were at least 90 days late on paying back their loans at the end of 2013, compared with 6.2 percent delinquencies on student loans in 2003. Moreover, the Fed's figures on delinquencies hide more stark data: nearly half of all students with debt aren't currently in repayment thanks to deferments and forbearances and the fact that students are not expected to pay while they're in school.' An attached graph shows an alarming spike in delinquent loans that looks a bit like mortgage delinquencies did at the beginning of the sub-prime crisis."
Tell me again why college in the US costs sooooo much? It's not like you are getting a super special top notch education that is not comparable to top Canadian universities for example.
Tired of my customary (Score:1)
No. It's not the borrowers who get bailouts -- it's the lenders.
But in 2005, Congress and the Bush Administration clamped down on bankruptcy filings, placing hurdles in the path of Americans trying to file and making it more difficult to discharge debts. In particular, the 2005 law made private student loan debt, like federal student loans, impossible to discharge in bankruptcy except under a difficult to meet hardship exemption. Today, bankruptcy allows for the discharge of credit card debt and auto loans but not student loan obligations. At the same time, the law permits judges to modify loans used for commercial real estate, vacation homes, and even yachts, but not a family’s primary residence. Two of the largest investments Americans make in order to enter the middle class – in their homes and their educations – are thus excluded from the relief offered to other debtors.
If Evil exists, this is it.
The government has essentially taken over the academic loan business in order to make funds more readily available to a greater number of people seeking a college degree. The result of this easy money? Not only this debt crisis but also college tuition and fees inflated at four times the rate of cost-of-living inflation. Way to go government intervention!
But in 2005, Congress and the Bush Administration clamped down on bankruptcy filings, placing hurdles in the path of Americans trying to file and making it more difficult to discharge debts. In particular, the 2005 law made private student loan debt, like federal student loans, impossible to discharge in bankruptcy except under a difficult to meet hardship exemption.
The lead-in for this, which made it possible in the first place, was the 1999 Gramm–Leach–Bliley Act, signed by Bill Clinton, which is what allowed the merger that led to the legislation. This effectively turned credit card debt for students who shouldn't have been offered credit cards in the first place to be non-dischargable by bankruptcy (effectively turning uncollateralized loans into collateralized ones).
http://en.wikipedia.org/wiki/G...–Leach–Bliley_Act
Frankly, there's no difference between the parties; they both work for the banks.
I don't think you understand this as well as you think you do. The person who gets a 30-year loan at a 3.5% rate is almost certainly doing much better than you, despite having to pay more total interest.
Let's look at some numbers. Your plan requires a monthly payment of $2274 every month for 10 years. Their plan requires a monthly payment of $1033 every month for 30 years. If they put the $1241 per month saved into an investment that gives 4% NOMINAL returns per year (which is quite a low rate of return historically speaking), then after 10 years, here is how their finances compare to yours:
You: No mortgage, no additional assets
Them: A debt of $178,082 and an investment worth $185,947.
As you can see, if they then pay off the principal, they end up almost $9000 ahead of you. If you factor in inflation, or assume annual returns better than 4%, the situation swings even further in favor of the 30-year mortgage. For example, using the 9.5% historical annual returns of the S&P 500, the person with the 30 year mortgage ends up $54,000 ahead of you after 10 years.
Note: In reality, banks charge a higher rate for the 30-year mortgage for exactly this reason.