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Student Debt: $1 Trillion Club

Have student loans? Welcome to the $1 trillion club What the student debt problem looks like, and what it means for an entire generation. What stacks of $100 bills look like... $10,000 $1 million $ 1 billion Statue of Liberty 309 ft $1 trillion 450 ft To spend $1 trillion, you would have to... Spend $100 a second for the next 317 years. Or you could: 1. Attend Harvard over 4 million times. (Talk about getting a degree in everything.) 2. Cover your lawn with 50 billion high-quality plastic flamingoes. (Channel your Inner bird enthuslast.) 3. Glve every person on the planet $142. (Channel your Inner philanthroplst.) 4. Buy Facebook. Twenty times. One trillion dollar bills would stretch to the moon and back 400 times. How did this happen? Literally everyone Is to blame: schools, the federal government, state governments, and even students. 1. College costs are going up Price inflation over time % Increase 1,200 College tuition & fees Educational books & supplies 1,000 House prices Consumer prices 800 600 Average hourly wage 400 200 100 1979 80 82 84 6 88 90 92 94 96 98 2000 02 04 06 Q1 1979 - 100. Sounce: Bareauoflabor Statktie; FHFA; ThomsonRoutars Remember when the"housing bubble" popped In 2007 (grey)? Compare that to college tultlon & fees (orange). Here's why: www Tuition inflation Tultlon costs historlcally Inflate twice as fast as the U.S. dollar. When Fewer local & state subsidies Government spendling on higher education Is at a 25-year low, so colleges supplement thelr budgets with Increased tultion. Higher demand Between 2000-2010, full-time college enrollment nationwide post-graduate earnings don't follow sult, college affordablity goes down. grew by 35%, meaning fewer resources for more students. 2. Students borrow more Federal loans 2001: $241 billion in loans Today: $904 billion 275% Increase In ten years Private loans 2001: $5 billion In loans Today: $140 billion 2,700% Increase in ten years Students borrow irresponsibly About 65% of students misunderstand the terms of their own student loans. That means they aren't comparlng options, reading the fine print, or asking questlons about one of the most Important financlal decisions they'll ever make. 3. Unsustainable trends Post-grad earnings aren't keeping pace Earnings of young grads vs. College costs % Increase 70% Real tuition, fees, room and boardat a private 4-yearcollege 60% Real eamings of full-time workers, 25-34, with a bachelor's degree 50% 40% 30% 20% 10% 0% -10% -20% 1991 92 93 94 95 96 97 98 99 00 01 R 03 04 05 06 7 08 09 10 11 1991=0% Change Source: Census, College Board But here's where things get scary Student loans can't be discharged in bankruptcy. If students default on their payments, collection agencies can collect from the students' future wages, tax returns, or even Social Security benefits. Capitalization of interest Variable interest rate Loan Default 4. Student loans are more expensive Default rate on student loans vs. Unemployment rate % Total 16.0 Cohort default rate Unemployment 18-24 Unemployment 25-34 12.0 8.0 4.0 *92 94 96 98 00 *02 *04 "06 "08 10 Borrowers defaulting within 1 year, %. Source: Department of Education, BLS, Credit Sulsse As unemployment rises, so do default rates. That Increases risk for lenders, which translates back to the consumer in the form of student loans with higher interest rates. DEBT What can you do about it? Politics are at a standstill. And everyone loves to argue about fiscal policy, which means nothing is golng to change any time soon. That's why It pays to take control of your own financlal future. Harness the $100 power of extra payments Chipping in an extra $20, $50, or $100 a month toward your student loan payment will not only get you out of debt faster, It'll mean your debt's overall cost will go down. Why? The faster you pay, the less time Interest has to accrue. $50 $25 $10 $5 The best part: Saving a little extra every month Is easler than you think. Save $100 Skip store-bought coffee. Instead, brew your own. $135/Month $35/Month 2.5 LB French roast: $25 $4.50 latte per day 2 gallons of mlk: $10 Save $50 Skip the gym membership. Instead, excercise outside. $50/Month $0/Month Average gym membership Rock "Eye of the Tiger" on repeat and run outside for free Save $20 Skip one meal out. Instead, eat at home. $30 $10 Dinner out Home cooked goodness Savlng more means paylng your loans off faster and getting on with your debt-free life. ismarterbucks. Sources http://www.consumerfinance.gov/ http://www.investmentnews.com http://younginvincible.com/ http://demonocracy.info/ http://admissions.college.harvard.edu/ http://www.finaid.org/savings/tuition-inflation.phtml http://money.cnn.com/ http://www.nytimes.com/ State Higher Education Finance, FY2011, State Higher Education Executive Officers/The College Board

Student Debt: $1 Trillion Club

shared by gcmintern on Dec 01
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Shows how many people are affected by student debt, a problem that has added up to $1 trillion.

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SmarterBucks

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Economy
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