Quote
Student loans surpass auto, credit card debt
By Daniel de Vise
Americans owe more on their student loans than on their credit cards or car loans, according to a new report from the Federal Reserve Bank of New York.
Student loan debt stands at $870 billion nationally, surpassing the nation’s outstanding balance on auto loans ($730 billion) and credit cards ($693 billion), according to Grading Student Loans, which is not a formal report so much as a scholarly blog post published by the economists at the New York Fed.
It comes at a time of heightened awareness of the student debt crunch. Last fall, President Obama took executive action to cap monthly loan payments at 10 percent of discretionary income, down from 15 percent previously. Obama has challenged colleges to help students manage their debt by keeping costs down.
One-third of the national student-loan balance is held by people ages 30 to 39, and another third by people older than that, signifying that only a small share of college graduates manage to retire their loan debt while still in their 20s.
I will present the report’s other key findings in bullet form, to make for easy reading:
• Student loan debt is rising at a time when other debt is flat or even declining. From the second to the third quarter of 2011, the nation’s loan balance grew 2.1 percent, from $852 billion to $870 billion.
• Fifteen percent of all Americans with enough of an economic pulse to have credit reports have outstanding student-loan debt. Two-fifths of people under 30 have loan debt, and 25 percent of those between 30 and 39.
• $85 billion in student loan debt is “past due,†and of that total, three-quarters is owed by people over 30. More than five million borrowers have past-due student loans.
http://www.washingtonpost.com/blogs/college-inc/post/student-loans-surpass-auto-credit-card-debt/2012/03/06/gIQARFQnuR_blog.html
The next bubble to burst, perhaps?
I will be in that group still paying in my 30's.
One big issue with student loans is making sure students understand the payments and income that can be realized from the degree they are seeking. I look at what I made before my degree and what I made after and compared to my loan payments it is a good return on investment. However, a lot of students are told the average wages which may not apply anymore and include top earners so the debt seems more manageable than it really will be coming out of college when beginning their careers and trying to establish themselves.
My wife and I are in our 30s and are almost finished paying our (relatively small) loans.
From talking to friends and acquaintences, the willingness to be saddled with paying back debt for years - even decades - is not there, and whether they owe money to credit cards, student loans, or mortgages - many of them have just stopped paying.
It's almost like money is becoming an abstract concept instead of a real thing. When you're 25 and owe $200k on your house, $60k in student loans, $15k in credit card debt - are you in a rush to pay all that off? Especially when many entry-level jobs for adults coming out of college are starting in the $32k-37k range.
Quote from: Bativac on March 07, 2012, 10:53:21 AM
From talking to friends and acquaintences, the willingness to be saddled with paying back debt for years - even decades - is not there, and whether they owe money to credit cards, student loans, or mortgages - many of them have just stopped paying.
We should re-institute debtors prison
Quote from: ben says on March 07, 2012, 09:32:56 AM
The next bubble to burst, perhaps?
Quite likely. This has been a looming crisis for a few years now. Tied to unemployment, but also to for-profit schools lying to students about their post grad job prospects. I know Coastal has had some issues, but I think its more the trade type schools.
Quote from: CityLife on March 07, 2012, 11:09:04 AM
Quote from: ben says on March 07, 2012, 09:32:56 AM
The next bubble to burst, perhaps?
Quite likely. This has been a looming crisis for a few years now. Tied to unemployment, but also to for-profit schools lying to students about their post grad job prospects. I know Coastal has had some issues, but I think its more the trade type schools.
Amen.
From Wikipedia, UF college expenses:
QuoteTuition For the 2008-2009 academic year, annual undergraduate tuition was $3,790 for in-state students and $20,460 for out-of-state students. For the 2008-2009 academic year, annual graduate tuition was $8,190 for in-state students, and $23,315 for out-of-state students. For the 2008-2009 academic year, annual law school tuition was $10,800 for in-state students, and $30,100 for out-of-state students.[40] For the 2008-2009 academic year, annual medical school tuition was $23,930 for in-state students, and $51,777 for out-of-state students.[41] For the 2009-2010 academic year, annual undergraduate tuition was $5,044 for in-state students and $27,321 for out-of-state students.
So tuition for undergrad, in-state jumped from 08/09 to 09/10 by $1254, a 24% increase. When was the last time you saw a car model increase 24% year over year? Student loans are on their way to becoming healthcare loans, and are serious drag to growing the economy. No wonder Bright Futures is almost broke, they cannot afford a 24% increase in tuition year over year. And the public universities are about to raise their fees again.
College education should not cost a decade of growth on its young minds.
Speaking of deceptive practices:
"Six graduates from the Florida Coastal School of Law have filed a class-action lawsuit against the Jacksonville school over what they say is misleading post-graduation statistics marketed to prospective students.
Florida Coastal is accused of giving inflated job-placement and salary numbers of its graduates. The lawsuit asks that $100 million in damages and relief “refunding and reimbursing current and former students for tuition†be awarded to the plaintiffs."
Read more at Jacksonville.com: http://jacksonville.com/news/crime/2012-03-07/story/florida-coastal-school-law-grads-file-suit-against-school-allege#ixzz1oSl6fMCD
Quote from: Kaiser Soze on March 07, 2012, 11:00:20 AM
We should re-institute debtors prison
A better idea would be to re-connect risk to the banks making the loans.
The key dynamic here is the transference of risk from the lenders, who stand to reap immense profits from these loans, to the students. This transference is enforced of course not by the banks but by their partner, the State, which obliterated the right to bankruptcy for students while guaranteeing profits to the banks via Sallie Mae, another guarantor of private profits backstopped by taxpayers.
The feedback between risk and return has been severed. Lenders can extend massive loans to marginal students attending for-profit colleges, knowing their losses will be backstopped while the gains are theirs to keep, and the debt-serf students are indentured for life.
Imagine if risk were connected to gain. Maybe lenders would be a bit more careful about which students they deemed worthy credit risks; perhaps they would begin differentiating between low-market-value liberal arts degrees from hard-science degrees.
Maybe they'd start considering the students' incomes while in university. Maybe they'd recognize differences in risk between for-profit diploma mills protected by the rapacious, captured-by-corporations State and state universities.
There can be no "fix" to our decline until risk is bound once again to return and gain. If risk is transferred to others, you're left with some type of indentured servitude and financial tyranny in service of the banks and their State toadies.
It's clear that the system is in trouble and it's largely the result of treating for-profit schools like real schools.
These places charge huge tuitions for usually very low quality education. Many or most aren't even accredited by their regional body - they get "national accreditation" from bodies with extremely low standards that exist solely for them. Having this national accreditation means the federal government can give grants and loans to students to go to them, allowing them to charge huge tuitions. The schools have very little incentive to see that their students graduate or will ever be in a position to pay back those loans; they just recruit whoever they can get. As a result, a huge percentage of their students default on their loans with nothing, or very little, to show for it. We're essentially giving free taxpayer-subsidized money to profit making enterprises that produce little or nothing.
Honestly it would be an easy fix:
1). No federal financial aid to any institution not controlled as an audited non-profit.
2). No federal financial aid to any institution not accredited by the regional accrediting body for that particular locality.
3). Implement stricter reviews of such things as recruitment practices, graduation rates, tuition levels, and students' debt burden vs. loan repayment rates. No federal financial aid to institutions that don't pass muster.
Just doing these three things would result in the for-profits either coming to an end or evolving into real institutions (some of the better ones, like Florida Coastal, could make that transition rather easily, and some are actually moving that way already). This would free up a vast amount of federal aid for students at real schools and better ensure that loans were going to people who could realistically be expected to pay them back - thereby reducing the cost across the board. The overall cost of higher education would go way down while educational standards would go way up, simply by removing the leaches from the process.
From Truthdig:
Students as Important as Big Banks, Elizabeth Warren Says in Bill Introduction
The senator’s first piece of stand-alone legislation is aimed at giving students who take out federally subsidized loans the same interest rate the big banks get when they borrow from the government. Student loans rates are set to go up to 6.8 percent July 1. Meantime, the big banks responsible for plunging the economy into a recession a few short years ago pay just 0.75 percent.
I say.... Elizabeth Warren for president. How can the above be happening? Here we have students who have been and are attempting to get an education, and who are having difficulty getting jobs in an economy partially destroyed by the machinations of the big banks, now being forced to pay the increased interest rates of 6.8% on the loans they’ve incurred in their quest to become educated.
And the banks, who are partially responsible for bringing the economy to its knees, are getting an interest rate of 0.75%? This country is f*@ked up. We have somehow accumulated over recent years a population of legislators obviously lacking critically needed mental abilities. >:(
While I agree there is a problem with tuition and student loans... does ANYONE see a problem with this statement???
QuoteWhen you're 25 and owe $200k on your house, $60k in student loans, $15k in credit card debt - are you in a rush to pay all that off? Especially when many entry-level jobs for adults coming out of college are starting in the $32k-37k range.
In this particular case... there seems to be a big problem on the debtor side of the equation...
Quote from: finehoe on March 07, 2012, 02:58:36 PM
Quote from: Kaiser Soze on March 07, 2012, 11:00:20 AM
We should re-institute debtors prison
A better idea would be to re-connect risk to the banks making the loans.
The key dynamic here is the transference of risk from the lenders, who stand to reap immense profits from these loans, to the students. This transference is enforced of course not by the banks but by their partner, the State, which obliterated the right to bankruptcy for students while guaranteeing profits to the banks via Sallie Mae, another guarantor of private profits backstopped by taxpayers.
The feedback between risk and return has been severed. Lenders can extend massive loans to marginal students attending for-profit colleges, knowing their losses will be backstopped while the gains are theirs to keep, and the debt-serf students are indentured for life.
Imagine if risk were connected to gain. Maybe lenders would be a bit more careful about which students they deemed worthy credit risks; perhaps they would begin differentiating between low-market-value liberal arts degrees from hard-science degrees.
Maybe they'd start considering the students' incomes while in university. Maybe they'd recognize differences in risk between for-profit diploma mills protected by the rapacious, captured-by-corporations State and state universities.
There can be no "fix" to our decline until risk is bound once again to return and gain. If risk is transferred to others, you're left with some type of indentured servitude and financial tyranny in service of the banks and their State toadies.
Bingo.
The banks don't issue the loans any longer all they do is service the loans for the government. The federal government took over the student loan program and placed it under the Department of Education around the time health legislation was passed. Before the feds took over, student loans were much lower than the 6+% they are now.
http://www.nytimes.com/2010/03/26/us/politics/26loans.html?_r=0
http://www.huffingtonpost.com/2013/04/09/student-loan-rates-debt-economy_n_3048216.html
The student loans should really be at about 3%, not 7-10% interest. The more going to interest, the less going to retirement savings.
Quote from: carpnter on May 10, 2013, 08:56:01 AM
The banks don't issue the loans any longer all they do is service the loans for the government. The federal government took over the student loan program and placed it under the Department of Education around the time health legislation was passed. Before the feds took over, student loans were much lower than the 6+% they are now.
http://www.nytimes.com/2010/03/26/us/politics/26loans.html?_r=0
http://www.huffingtonpost.com/2013/04/09/student-loan-rates-debt-economy_n_3048216.html
Yes, that comment was several years out of date. The feds have taken over loans, the banks just service them now. We still have the problem of federally-backed loans going to for-profit schools and other rising costs.
There are plenty of rising costs at the public/state schools, not just for-profit. FSU and others keep going up 15% plus per year, significantly more than the CPI. if it was 100/credit to start, after 4 years, at 15% each year, by the time you graduated, it would be over 150/credit.
100
115
132.25
152
Quote from: mbwright on May 10, 2013, 02:24:12 PM
There are plenty of rising costs at the public/state schools, not just for-profit. FSU and others keep going up 15% plus per year, significantly more than the CPI. if it was 100/credit to start, after 4 years, at 15% each year, by the time you graduated, it would be over 150/credit.
100
115
132.25
152
I mean, the amount of loan and grant money that gets pumped into for-profit colleges (with little to no return) is a big part of what's driving the costs up across the board. There are other factors. The Florida schools' tuition is already very low, it's going up because the state keeps reducing its contribution.
Quote from: If_I_Loved_you on May 10, 2013, 02:54:49 PM
College Financial Aid Isn't Going to the Neediest:
By Karen Weise
May 09, 2013
When faced with questions about rising tuition, colleges have long responded that yes, tuition has skyrocketed, but many students don’t actually pay the full list price because of financial aid. In a new paper, the New America Foundation reveals that while students do get aid, the poorest students increasingly aren’t the ones getting the help. Instead, colleges are using their often limited resources to give students merit-based scholarships, which don’t take family finances into account. For the schools, it’s all in the name of “their relentless pursuit of prestige and revenue,†according to the paper.
Schools are “working hard to bring wealthy students to their campuses,†the authors write. “After all, it’s more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student.†The students getting “merit aid†aren’t necessarily betters scholars, either. For example, the paper cites data that show 19 percent of freshman with SAT scores under 700 (out of a maximum 2,400) received merit aid, as did 27 percent of freshman with scores between 700 and 999. The term “merit scholarships,†in other words, is a misnomer, the report says, because schools can distribute the aid however they please.
The result is that poorer families face a chasm between what they can afford and what they are being charged. Nine of 10 private colleges charge students whose families earn $30,000 or less a net price of more than $10,000; three of five charge those students more than $15,000. There are gaps at public colleges, too, though the spreads are smaller. Faced with a price tag they can’t afford, students turn to other solutions, such as taking out loans or working full time in addition to classes.
Some private colleges have made strides in helping the neediest applicants. Harvard and Yale, for example, leave a small gap cost for students to cover. But they still have small (albeit rising) enrollment of low-income students. At Harvard, 11 percent of the student body receives Pell Grants. (Check out the report’s interactive graphic (http://public.tableausoftware.com/views/pellprivates_test/Sheet1?:embed=y&:display_count=no)to see how different schools fared.) The report calls out Amherst College for leading the pack, both providing close to the full need for poorer students and actively recruiting diverse applicants. Almost a quarter of its student body receives Pell Grants. While Amherst has built its program over the past decade, the situation for needy students at scores, if not hundreds, of other schools has grown bleaker. http://www.businessweek.com/articles/2013-05-09/college-financial-aid-isnt-going-to-the-neediest
There is nothing wrong with merit based scholarships. In many cases merit based scholarships are awarded to the high school students who were very good in high school whose parents have an income level too high to qualify for grants but really do not have the funding to send their child or children to college.
So....the country has a system that was once the envy of the world. But government regulation has resulted in third party involvement and wildly inflated prices, now resulting in shoddy service and many being priced out of the market.
We should make it a civil right to have a college degree. Our massive Federal program to ensure that everyone has a degree shall be funded by everyone!....well, at least those who can pay.....taxes. The Federal government shall ensure that the third party lenders treat everyone equally and will ensure their profit. All institutions must follow the Federal guidelines for education in order to control costs. We shall call it...Obamaploma!
And if it doesn't work, we will institute single payer government provided education, just like they do in more civilized countries. :)
I went back to school at 30 since I was laid of from an industry that was not handling the fiscal climate well. I managed to find a job that paid a whopping $18k a year, but it worked around my class schedule. As a single female with no children I qualified for nothing but subsidized student loans. I was out right told that if I had a child it would be different. I fought the debt for as long as I could paying out of pocket for as long as I could but as my degree progressed my classes and books got more expensive and I had to get the loans. As I went back to school at 30, the student that I was in high school is not reflective of the student I am in college, my first degree I obtained with honors. There are many of us that have had to or decided to go back to school because of being laid off in our last careers and having to find new paths. This is something that has hugely affected the market and universities.
I am currently looking at a healthy student loan debt. I have a better job now. Which means that in working toward my Masters it is steadily growing. I am still single and childless. I will never qualify for the "free money." My first student loan was at a 4% rate my last I believe is at 6% (and no longer subsidized). I do owe more on my student loans that I do on my car and credit cards combined. Because of my employment I am not considered a "hardship case" for scholarships and while I am an honors student I am not a genius. I am just a bit above average. I apply for the scholarships that millions of people apply for every semester. Competition is brutal. To date I have not gotten any.
Higher Education is not a right. It is a privilege. You have to work for it and you have to earn it. HOWEVER; the cost of tuition, text books and fees is crippling. Add to that the ever increasing interest rates and it is making that privilege harder and harder to earn even for those of us that can simply because we cannot afford the price tag.
For the high school students out there, be aware that the military is one of the few organizations left in the country that gives out full rides to just about every school of your choice (sometimes room and board included). Graduating with a guaranteed 40k+ job (80k at 4 years) with no debt is a pretty good plus too.
I have a couple friends who went to school on the GI bill lately, and it ain't what it used to be. They have debt. Less than average, for sure, but not a blank check anymore either. That changed around 2006/7 from what I hear.
He's talking about ROTC. The GI Bill was never a free ride. The old GI Bill, which did not require any contribution from the service member and was a true benefit, ended in 1977. The newer Montgomery GI Bill requires contributions from the member. BOTH GI Bills required serving your country in the Armed Forces.
JFmann is correct in pointing out the educational advantage of the military. Just remember the obligation that goes along with it.