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Student Debt/Default Rate/Credit Cards
I recently wrote a column showing why bankruptcy protections are essential for the healthy functioning of the nation's federal and private student loan systems. Since, there have been two concerns raised by commenters. First, that returning bankruptcy protections would allow widespread abuse of the system. Second, that bringing bankruptcy back would cause private lenders to tighten up their lending, and also cause the loans to be more expensive for the students. To be blunt, those dogs don't hunt today, and really never did for that matter.
Increasingly, students who graduate and can't find good-paying jobs -- and even those that do find jobs -- are finding it hard to pay back student loans. Graduates blame the economy, the cost of tuition, and a society-fed notion that a college education is a necessity, even if it means going into debt. They also say that if they realized how much they'd end up owing, they may have never taken the loans.
The amount of debt that's being carried by certain consumers in this country is growing by about $2,800 a second. This credit menace is student loan debt, which is pushing $1 trillion, according to FinAid.org, a site dedicated to college financial aid information that has created a "Student Loan Debt Clock" where, if you like to be uncomfortable, you can watch this debt as it piles up, at a rate FinAid pegs at around $2,800 a second. Potential ripple effects are numerous, including whether a generation will be able to buy homes.
It must be acknowledged that the lending system supporting our higher education system is structurally predatory. In the absence of fundamental, free-market consumer protections like bankruptcy, statutes of limitations, refinancing rights, and others, and in the presence of unprecedented collection powers that would make "mobsters envious" (Elizabeth Warren's words), we have a student loan system where the big lenders make significantly more money on defaulted loans than healthy loans.
We have gone from the days when students took on no debt, moved through a period of "manageable debt,'' and now stand poised at the edge of an era of destabilizing, demoralizing debt. UMass students now graduate, on average, with $24,000 in debt, up from $14,000 only four years ago. At private universities, where education costs are two and a half times what they are at public universities, the debt story is even more daunting. How do we fix this major national problem?
Credit card companies dished out nearly $1.5 million to Rhode Island's colleges and alumni associations in 2009 and 2010 in exchange for valuable information that includes mailing lists, e-mail addresses and phone numbers for current and former students.
With college costs and student loan debt continuing to soar in the United States, here's an idea from our neighbor to the north: Allow students to get a bachelor's degree in three years, the way many Canadians do, instead of four.
The three-year bachelor's degree has been hailed by some as the solution to cutting college costs, allowing students to graduate and enter the job market sooner. It has one fundamental flaw, however, in that it benefits only those students who have the highest academic aptitude and the financial means to attend college full-time, year-around, for three years.
The new debt-management system, which tracks and manages more than $33-billion in defaulted student loans owed by more than three million people, is supposed to rehabilitate borrowers each month. It has not done so since August, and some frustrated debtors have stopped making payments on their loans, risking a second default.
Brie Miller owes nearly $150,000 in college-loan debt. With college tuition fast outpacing inflation and joblessness stubbornly high, Miller is not alone in a deepening pool of young Americans way over their heads. Still not in default on her repayments, the 26-year-old public servant teeters at the brink. "It's awful," she said. "I've cried a bucket of tears. My husband and I will never be able to buy a house, or afford to start a family, or contribute to the economy. The whole point of going to college was to have a better future, but now I have a worse one."
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