Student loan | <b>Student loans</b> may drag down economy for years - Washington <b>...</b> |
- <b>Student loans</b> may drag down economy for years - Washington <b>...</b>
- The surprising winners of Obama's <b>student</b>-<b>loan</b> program <b>...</b>
- <b>Student Loan</b> Forgiveness (and Other Ways the Government Can <b>...</b>
| <b>Student loans</b> may drag down economy for years - Washington <b>...</b> Posted: 29 Sep 2014 12:00 AM PDT  Students protest the rising costs of student loans for higher education on Hollywood Boulevard in... Soaring levels of student loan debt are not only burdening recent graduates but have created entire generations that aren't able to save and invest, potentially hurting long-term economic growth. College-educated members of Generation X, those born between 1965 and 1980, have accumulated less wealth than their parents had at the same point in their lives, according to a new study by the Pew Charitable Trusts. The Gen Xers have built up $20,000 less home equity than their parents, adjusted for inflation, and a median debt seven times higher. That's despite the younger generation having an adjusted median household income that is $20,000 higher, largely because more couples have two incomes today. But often both earners are paying off debt, eliminating some of the benefit of dual incomes. "It is really the student debt that is pulling their wealth totals behind," Pew researcher Diana Elliott said. Though most graduates eventually pay off their debt, they are sacrificing home equity and saving. While they're in debt, they can't afford to make big-ticket purchases including houses and cars, are less inclined to start their own businesses, and many delay marriage and child bearing. "The domino effect of student loan debt is real, and it is spreading. It is hard to erase this debt quickly – paying it back may take many long years and prevent people from achieving other financial milestones," Richard Cordray, director of the Consumer Financial Protection Bureau, said in a speech Wednesday. According to a June study by the Brookings Institution, the average borrower took 13.4 years to pay off his loan in 2010, up from 7.5 years in 1992. Total student debt now tops $1 trillion, notes Peter Morici, professor of economics at the University of Maryland. Just servicing that debt is taking up tens of billions, maybe $100 billion a year. Think of all the purchasing power that is being lost, he said. "What's more, it is really doing a lot to push down the birth rate among middle-class Americans, and that has very profound long-term consequences. For one thing, babies are the best long-term stimulus package you can have," Morici said. "But with this kind of debt they don't think they can have children." Meanwhile, the generations of graduates following the Gen Xers are piling up even more student loan debt. That suggests the scenario will repeat itself, creating a continuing drag on the economy. The longer-term consequences are worrisome, too. Because the borrowers will accumulate less wealth over their lifetimes, their children will be at a disadvantage as well. "We know from our work on economic mobility that wealth is often a springboard for mobility investments. … This has implications for their children. If the Gen Xers do not have money to invest in their children, then those children's career and college aspirations won't have the benefit," Elliott said. The number of households with student loan debt has risen from 11 percent in 1992 to 19 percent today, as average household debt more than doubled from $11,000 to $25,000. The homeownership rate for people in their 20s – most first-time buyers — hasn't recovered from the 2008 financial crisis and fell another 15 percent in the first quarter this year. That partly explains the sluggishness of the economic recovery. "The debt loads certainly are high enough that they may play a role in, for example, making it hard for people to buy first homes, to build a downpayment," Federal Reserve Chairwoman Janet Yellen told the Senate Budget Committee in May. "That may be an effect we're seeing already in the housing market." It is also having an impact on people's ability to retire. Some Americans' Social Security payments are being garnished because they didn't pay off their debt, Morici said. "You have got to remember that not everybody who takes out a student loan is 20 years old," he noted. Some debtors are mothers re-entering the workforce or people going to graduate school after losing a job. The average amount borrowed for undergraduate degrees rose from $15,000 for those who graduated in 1992-93 to $22,400 for those who graduated in 1999-2000 and $24,700 in 2007-08, according to the National Center for Education Statistics. To look at one age group, the Federal Reserve Bank of New York reports that 43 percent of 25-year-olds hold student debt today, up from 25 percent a decade ago. The average amount of debt they are carrying has increased 82 percent from $11,000 to more than $20,000. Brendan Coughlin, head of auto and education finance at Citizens Financial Group, recalled a recent incident in which a customer refinanced his student debt. He happily announced that he now could afford, not a new car or house, but new tires. "Those are the type of anecdotes we are starting to hear from our customers," Coughlin said.  |
| The surprising winners of Obama's <b>student</b>-<b>loan</b> program <b>...</b> Posted: 11 Jun 2014 01:42 PM PDT  (Thinkstock) Students who took out big loans for graduate school and those with higher incomes stand the most to gain financially under President Obama's expansion of the federal government's loan forgiveness program. Lawyers, doctors and other highly trained professionals who utilized federal loans throughout their post-high school education could walk away with most or all of their graduate school debt forgiven by the federal government under the program, say experts. "You can roll it all into one balance and it has a really powerful effect," said Jason Delisle, director of the Federal Education Budget Project for the New America Foundation, a nonpartisan think tank. "The chances that you will fully repay your grad school debt are very slim." Obama on Monday signed an executive order that expands to as many as 5 million people a program allowing federal student loan holders to cap monthly payments at 10 percent of adjusted gross income. The program also includes debt forgiveness after 10 years for those who work for 501(c)(3) non-profits or in the public sector. For those in the private sector, they can stop paying off their loans after 20 years. The program already exists for those who took out federal student loans after Sept. 30, 2007. The expansion will offer it to all federal borrowers. At the White House on Monday, Obama outlined the plan in remarks geared toward loan holders with debt from four-year colleges, who he noted on average have nearly $30,000 in loans to repay when they graduate. Obama said he had less sympathy for those, who like himself, took out big loans to pay for law school. "That made sense because the idea was if you got a professional degree like a law degree, you would probably be able to pay it off," Obama said. "And so I didn't feel sorry for myself or any lawyers who took on law school debt." But Delisle argues that Obama has essentially encouraged law school loans, and even an extra year of study for law students seeking specialty degrees, who know if they take a public-sector job, they'll never have to pay back the fourth year or perhaps any of their law degree funding. A lawyer with $150,000 in combined undergraduate and law school loans at a 6 percent interest rate, for example, could walk away from the law school debt by going to work in the public sector with a starting salary of $70,000. Even with a 4 percent raise each year, the public defender or prosecutor who makes on-time payments and utilizes the monthly loan payment cap and 10 year forgiveness program will escape having to pay $187,000. The rest would be picked up by the government. For undergraduates, the forgiveness factor is much smaller. That's because the average undergraduate student loan of $29,000 is more likely to be all or nearly paid off in a 10 or 20 year time span, say experts. Under the law, undergraduate borrowing is mostly limited to $30,000. There is no limit on graduate school borrowing, which is $58,000 on average. "So this is an interesting wrinkle," said Neal McCluskey, associate director of the Center for Educational Freedom at the Cato Institute, a libertarian think tank. "This executive order is probably going to make very little difference for undergraduate students," McCluskey said. "For the average person with regular undergraduate debt, they will have paid off most of that in ten years or 20 years. Where it really becomes powerful is for graduate student debt." The program aims to do more than just forgive debt. It will allow graduates who pay on time to make payments based on their salary. It's a move that proponents say will help young people escape crippling monthly loan dues that prevent them from living independently, buying homes or otherwise investing in their own future. The program also aims to help attract talent to public sector jobs, which tend to pay less than work for private companies. "I think it makes a lot of sense to use it as a way to participate in high-demand fields that just don't pay well, like public school teaching," University of Wisconsin-Madison professor Nick Hillman, an education policy expert, said. But Hillman said the program Obama expanded on Monday has so far been poorly executed, is hard for loan holders to access and has never been analyzed by the government to see if it is actually working. "It's like apple pie," Hillman said. "Who couldn't like that idea? But you start to dig for that evidence that it's working and it's really kind of flimsy." DeLisle points out that the federal government already offers a similar program to all borrowers, capping the monthly payments at 15 percent of salary and including the loan forgiveness timetable. The new program merely lowers the cap by another five percent. The difference is likely to be small for many borrowers, but will be much more generous for those who earn bigger salaries, he said. For someone earning $27,000 in adjustable gross income, for example, the average loan payment will drop from $128 per month to $85 per month. But for someone earning $80,000 per year, payments will plummet over $200 per month, from $619 to $412. "The people who will see the biggest reductions are people earning higher incomes," Delisle said. "That is the effect of this change. You put that together with the loan forgiveness, and this is tailor-made for graduate students." |
| <b>Student Loan</b> Forgiveness (and Other Ways the Government Can <b>...</b> Posted: 08 Oct 2014 05:00 AM PDT Have you heard or read about student loan forgiveness? Are you wondering what it is or if it is really possible? Perhaps you already know a little about it and you want to find out if you qualify. Well, you've come to the right place. We'll provide answers these questions and tell you where you can go to learn more. What is loan forgiveness? Loan forgiveness is the cancellation of all or some portion of your federal student loan balance. Yes, that's right—cancellation of your loan balance. If your loan is forgiven, you are no longer required to repay that loan. Is it really possible to have your student loans forgiven? Yes. However, there are very specific eligibility requirements for each situation in which you can apply for loan forgiveness. If you think you may qualify, it's definitely worth investigating. How do I get my loans forgiven? There are a number of situations under which you can have your federal student loan balance forgiven, and we've provided a few in this post. You will, however, want to research your options at StudentAid.gov/repay and contact your loan servicer for any questions you may have about student loan forgiveness. A couple examples of situations in which your federal student loans may be forgiven include:
There are additional situations that allow you to apply for cancellation of your federal student loans. For example, if you are totally and permanently disabled, a member of the U.S. armed forces (serving in area of hostilities), a member of the Peace Corps, or a law enforcement or corrections officer, you may be eligible for cancellation of a portion of your federal student loan. Learn more about how you may qualify for loan forgiveness and contact your loan servicer with questions. Are there other ways in which I can get help repaying my loans? There are additional government programs that provide student loan repayment assistance for individuals who provide certain types of service. A couple examples include:
Remember, there are resources available to help you repay your loans. In addition to loan forgiveness and other benefit programs, you also have other options (including repayment plans that are based on your income) if you find yourself in a situation where you're having trouble making your loan payments. Be sure to discuss your options with your loan servicer. Lisa Rhodes is a writer at the Department of Education's office of Federal Student Aid. |
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