The Tragedy of Student Loans

The Tragedy of STUDENT LOANS For the first time, the delinquency rate on student loans is higher than the rate for credit cards, car loans, or any other kind of consumer loan. Why is this an issue, and what are your options? Take a look: According to the New York Fed, student debt now totals $956 billion in outstanding loans. How Does Student Loan Debt Compare? Total Debt Balance and Its Composition (trillions of dollars) 2005 Total Student Debt (billions) $1000 $500 2006 2006 2008 2010 2012 Number of Borrowers 2007 "05 '06 '07 '08 '09 '10 '11 '12 2008 I Under 3O I 30-39 1 40-49 I 50-59 2009 I 60 and up I Mortgage I HE Revolving I Auto Loan I Student Loan I Other Credit Card Percentage of Balance 90+ Days Delinquent 2010 15% 2012 12.5% 2008 2004 2006 10% 7.5% 5% 2.5% 0% 11% Average Student Loan Balance The percentage of student loan balances that were 90 or more days delinquent rose to 11% in the July-September quarter. This is higher than the delinquency rate on credit cards. $20,000 $10,000 COLLEGE $0 2005 2006 2007 2008 2009 2010 2011 2012 The problem with defaulting: The government can garnish up to 15% of a borrower's wages, Social Security dis- ability, and Social Security retirement income. What's the Issue with Deferment Delinquent LOANS? Collection charges of up to 20% can turn a 10-year loan into a 19-year loan. Forebearance 01 Reductions in It will have lasting damage on the borrower's credit score, monthly payments Many of the delinquent loans will default with harsh consequences even though there are good options for debt relief like: which can make it difficult to get an auto loan or mortgage. Why do people default? Default rates are four times as high FOR DROP OUTS Some put off dealing with the problem Some may not Some don't feel like they should repay them understand their options The federal government holds 85% outstanding student debt There are options Borrowers who are: To ensure that students from all backgrounds get an equal shot at a college education, the government doesn't make loans based on a student's ability to repay them. In the military Employed Unemployed Back in school - Consequently- student loans may be highly unlikely to REPAY THEM some students who take out Can ask for up to three years of full or partial deferment on repaying a student loan Borrowers who are employed but can't afford their monthly Graduated Extended Income-based Income- Income- Pay-as-you- payment have multiple options: contingent repayment repayment repayment repayment sensitive earn repayment repayment BY NC ND You are free: to Share - to copy, distribute and transmit the work. Sources: businessweek.com newyorkfed.org Information provided by: http://collegestats.org/ COLLEGESTATS.ORG | 2011