Here’s an article from Inside Higher Ed Turning Point for Student Loans that I highly recommend reading:
“A new report shows student loans outpacing other household debt among most severely delinquent loans.
The New York Fed this week presented an unsettling picture of how student loans stack up to other household debt.
Defaulted student loans have surpassed all other types of household debt classified as “severely derogatory,” including mortgage and credit card debt, according to a report from New York Fed researchers.
Fed researchers defined severely derogatory debt as any kind of delinquent loan combined with a repossession, foreclosure, or charge off.
The proportion of debt falling into that category in U.S. households has stayed fairly consistent for the past four years. But defaulted student loans now make up 35 percent of that debt.
Auto loans are the only type of severely delinquent debt to see the same growth in recent years, but they trail student loans in the severely delinquent category.
That trend though is not entirely shocking, said Colleen Campbell, director for post-secondary education at the Center for American Progress.
“Student debt is fundamentally different from other types of debt,” she said.
Because other types of household debt are underwritten – meaning they assess the creditworthiness of borrowers before making a loan — those markets have tightened since the Great Recession.
But the federal government has continued to lend to student borrowers at roughly similar rates because student loans work like an entitlement benefit.
Other key differences separate student debt from other kinds of household debt. Homes and cars can be repossessed by lenders and the debt charged off.
When a student loan borrower becomes delinquent, interest on their loan continues to accrue and their balances grow.
I’d also suggest that the reason why we as a country can’t pay our student loans is because most of us never knew how much we had to borrow until the very end.
It’s like we took it one day at a time.
If you don’t have a clear plan to maximize the free money you can receive from colleges or understand how much you and your children will have to pay to get a Bachelor’s degree, please register for my upcoming webinar here:
You can also call me at 626-657-7887 so I can help.