How much is too much?! The scary growth of student debt
By Suzanne Martindale on Friday, March 7th, 2014
Once again, student loans are in the news: and the news isn’t good. According to fresh numbers from the Federal Reserve Bank of New York, student loan debt – and default rates – are on the rise while most other kinds of consumer debts are stabilized or shrinking.
This is hardly surprising, since tuition has skyrocketed, the economy is still weak and recent graduates are struggling to find jobs. But why has the situation gotten so bad?
Well, more experts and news outlets are emphasizing the connections between overloaded student loan borrowers and the health of the economy. Borrowers stuck with hefty student loans often can’t afford or qualify for other kinds of credit like mortgages, auto loans or personal loans. In addition, student loan borrowers with tight budgets are in no position to buy consumer goods or put a down payment on their first house. Some graduates have to move back in with their families instead of starting their own households.
And it’s not just the students themselves who are borrowing student loans. Parents without enough savings or other resources are taking out their own student loans to help their children pay for college.
This means that student loans may be holding back our economic recovery, because borrowers have to spend all their money on student loan payments – a vicious cycle indeed.
Meanwhile, the consequences of falling behind on student loan payments can be devastating. The federal government has powerful tools for coming after defaulted borrowers – they can seize assets and even Social Security benefits if they have to. Banks and private firms that make student loans don’t have to offer flexible repayment plans if you can’t afford your monthly payments. And in most cases, student loans can’t even be discharged in bankruptcy. Even gambling debts get easier treatment!
We here at CU believe it’s time to get back to basics. We need to give all our students affordable access to quality higher education, and open doors to economic opportunity instead of piling on student debt.
To learn more, visit our student loans page at DefendYourDollars.org.