40% of Student Loans are Delinquent as University Rates Explode

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Oct 10, 2009
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2 out of 5 student loans are delinquent while university cost climb twice the rate of inflation, faster than health-care or any other segment of the economy. 63% of student borrowers can't make their student loan payments on time. Some university's get 87% of their revenue from Government backed student loans. This money does not all go to education, it funds student debit cards that can buy anything. Students are using the money to live the good life buying Beer, Pizza, Shoes, High Fashion Clothes, Cars, Gas, Jewelery, etc. This is a $1 Trillion subsidy to liberal professors & the unemployed.

CNBC: Price of Admission
College costs that are rising at twice the rate of inflation, CNBC investigates a system that encourages widespread borrowing—often with little regard to a student's ability to pay, leaving the average college graduate with tens of thousands of dollars in student-loan debt. How long can the system be sustained? Are student loans the next subprime mortgages? And if the bubble bursts, who will pay the price?

NYT: Loan Study on Students Goes Beyond Default Rates
For each student who defaults on a loan, at least two more fall behind in payments on their student debt, a new study has found.

The Institute for Higher Education Policy, a nonprofit organization, said in a report that two out of five student loan borrowers were delinquent at some point in the first five years after they started repaying their loans.

Almost a quarter of the borrowers used an option to postpone payments to avoid delinquency.

“We want to get beyond the dichotomy of people who default on their loans and everyone else,” Alisa Cunningham, The study, based on data from five of the nation’s largest student-loan agencies, found that only 37 percent of student borrowers who started repaying their loans in 2005 were able to fully pay them back on time.

And that percentage is probably decreasing, given the high unemployment rate of recent years, Ms. Cunningham said.

With tuition rising more rapidly than inflation or family incomes, student borrowing has been growing. College seniors who graduated in 2009 had an average of $24,000 in student loan debt, up 6 percent from 2008, according to an annual report from the Project on Student Debt.

Mark Kantrowitz, the publisher of Finaid.org and Fastweb.com, estimates total student debt at about $896 billion — more than the nation’s credit-card debt.

Meanwhile, default rates have been rising, to 7 percent, for the 2008 fiscal year, the latest period for which data is available, from 5.2 percent in the 2006 fiscal year. Students who did not graduate were more likely to become deliquent or default.

According to the new study, the majority of student borrowers at both two- and four-year for-profit schools went into deliquency or default. The majority of student borrowers at community colleges also went into delinquency or default. But because community college tuition is far lower than that of for-profit institutions, most community-college students do not take out loans.
 
The last I heard, the student loans can not be taken into BK. Is that still true?

NO! The new healthcare law now has the government pay off student debt if they can't pay it back. If you are a government employee the government will pay off your defaulted student debt sooner.
 
This is the next bubble to burst. The cost of a college education is getting to the point where it's no longer worth what you have to pay in order to get it. Another government created problem.
 
I saw an analysis the other day that claimed the Ph. D. glut began in 1969. CLEP everything possible and do everything else by correspondence and take just enough courses at a good college that accepts transfers of the credits to give your degree some prestige.
 
The last I heard, the student loans can not be taken into BK. Is that still true?

That is true, the Clinton administration made student loans nondischargable. Look at where college tuition prices took off. It happened shortly after the bill. Colleges didn't need to offer a realistic price, because the banks gave away student loans like water. The pain of paying back the student loan is not felt until after college. The student loan crisis is real. It is making a whole generation of young people indebted to the federal government for life.

Note: The Bush administration made things worse when they made private student loans nondischargable.

Obamacare made things even worse when they federalized the student loan market. Now students pay through the roof and can't even get a decent rate!
 
The last I heard, the student loans can not be taken into BK. Is that still true?

NO! The new healthcare law now has the government pay off student debt if they can't pay it back. If you are a government employee the government will pay off your defaulted student debt sooner.

Not true at all. I went to law school recently. I paid half myself and took out some student loans. $50K myself and $55K in loans. They government doesn't pay a thing here is what they do.

For new loans you have to go directly to the federal government. That is the SOLE provider. It used to be you could shop around to a variety of lender or ones your school accepted and get the best deal; the federal government backed the loan if the student defaulted. Now the student can only go to the federal government to get a loan at a higher interest rate then what they could have.

For consolidation. I know I tried to do it. Most my loans are 2.25 and 3.9%, very reasonable, but I have 2 loans one at 6.8 and 8.5%, not reasonable (Luck for me its was only $9K and change between the two of them, I paid most of it off in cash already). Consolidation with the new government lender works off a elevated median. Basically if you consolidate a 8.5 with 2.25, your new rate will be the media plus a .25 to .5%. Its robbery. It doesn't matter if rates in the open market are 1% you get what you currently have. They don't pay off shit.

For the federal loan forgiveness BS. Here is how that works. Depending on the industry. You have to work straight for the government for a certain period of time, paying your loans the entire time. If you work for the private sector inbetween (and they will know because of tax returns), then you start all over. For lawyers they just bumped it up to 20 year (up from 10). I assume they have done it for other industries as well. The bar is high for it.
 
Student Loan Forgiveness or Cancellation

the Government has a program(s) that can cancel discharge, or 'forgive' part, or even in some cases all of your student loan debt. Under this program, you may qualify for forgiveness of the remaining balance due on your eligible federal student loans after you have made 120 payments on loans under certain repayment plans while employed full time by certain public service employers.
 
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