Runaway student loan debt hurting economic recovery?

Student loan debt stands at $1 trillion and has surpassed credit card and auto loan debt in the United States, according to a story in the Associated Press.

That ominous news has some in the financial world concerned that student loan debt could be the next big ‘debt bomb’  to threaten the US economy’s recovery.

Average student loan debt recently topped $25,000, up 25 percent in 10 years.

Nearly 3 in 10 of all student loans have past-due balances of 30 days or more, according to a new report by the Federal Reserve Bank of New York.

And it’s not just recent students. Americans 60 and older still owe about $36 billion in student loans, according to the report.

In case you didn’t know, falling behind on your  student loan can be a nightmare. Missing just one student loan payment puts a borrower in delinquent status. After nine months, the borrower is in default. Once a default occurs, the full amount of the loan is due immediately. The government then can –and will —   garnishee a borrower’s wages and to seize tax refunds and Social Security and other federal benefit payments.

A dismal job market has made it difficult for people to pay off their student loans and has driven may people back to school and to more loans.

Did you go into debt to get a degree? Have you or did you have a had a hard time paying off your student loan?

67 comments Add your comment

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Fred ™

April 3rd, 2012
12:17 pm

Ah gotta love all these Republican sponsored “for profit” rip off schools that get the Gov’t loan money and fail to educate the students enough to get jobs and pay the money back. Le Cordon Bleu leads the way……..

shannon

April 3rd, 2012
12:29 pm

I was having a conversation about this subject not too long ago. I worked at a bankruptcy firm for about 3 years and i would see so many come in my office with over 100k in S/L yet were only making 25 30k a year.. Granted half the majors are BS when it comes to an actual career such as political science, sociology etc.. Not knocking those subjects but I think its time for High School Guidance Counselors to start directing our youths in the right direction.. For some college is needed for others just picking up a good trade would suffice for them…Agree/Disagree?

Jim

April 3rd, 2012
12:40 pm

Normally I take the harsh opinion that most people get into financial and personal trouble at their own accord, but I really think that student debt is a different case. I came from a family without a previous college graduate in a small town in Georgia, and my parents supported my family while living paycheck-to-paycheck. When I graduated from high school I was very close to the top of my class, so naturally my parents wanted what they thought was best for me, so they strongly suggested I attend UGA. I will be the first to say that I am thankful for the education and life skills that college afforded me, but until a recent bit of good news and luck that I was accepted to med school, I felt like I couldn’t afford the debt it cost me to obtain this. It took me 2 years out of college to finally be accepted to med school, and the time between has been extremely difficult as the research position I am currently working pays next to nothing and the student loan debts sucks most of it up like a sponge. If I would have had to think of a plan B, I would have never been able to get off of my own feet and get my own place to live or start a business. Unfortunately, I know many others who aren’t as fortunate and are having to worry about their futures with little money, time, or stability to pursue the dreams that the college money-machine promised them. How is it fair that some are having to decide between talent, intelligence, and future societal contributions, and what he or she can afford? The system needs to be fixed: tuition needs to stop inflating, banks need to stop throwing money at people, and some sort of compromise needs to be made that doesn’t hurt a person’s dream because someone wants more money in his pocket.

Ray Tardinski

April 3rd, 2012
12:44 pm

An look no further than the beloved UGA for a slew of worthless majors and poorly prepared students with massive debt and only the hope of working for 30-50K. Meanwhile Tech students get real degrees and have much higher starting salaries and actually can contribute to society. But hey, they are going to win another football national championship before the season starts.

TeachAManToFish

April 3rd, 2012
12:50 pm

I’m tired of paying for other peoples bad decisions.

guy

April 3rd, 2012
12:58 pm

many of these “colleges” are terrible and do not actually offer a real education. i don’t feel the need to pay for someone to go to class. sorry.

Young and Proactive

April 3rd, 2012
12:59 pm

Wouldn’t it be better if college education was free? If we adopted the German/Chinese model of free college education contigent upon the passing of a high school exam, why, we wouldnt have to worry because no one would be going to college for the first few years after the model’s enactment anyway! Why do we make it so hard to be educated? Free (contingent) college would encourage better study habits…and maybe even make us more competitive…

guy

April 3rd, 2012
1:00 pm

the exception is medical school…. that should be subsidized so that the prices of health service can come down

GregKennesaw

April 3rd, 2012
1:07 pm

you can’t fix stupid – it’s not my fault, I didn’t know… this was a crappy school, I didn’t know this major doesn’t pay very well, I didn’t know it would take so long to pay back………………. It’s not my fault……please make people that made good decisions bail my dunba$$ out

Ray Tardinski

April 3rd, 2012
1:13 pm

It’s okay, reelect Obama and he’ll forgive the debt. At least of Morehouse grads anyway.

Too CoooL Like that

April 3rd, 2012
1:16 pm

I truly feel that society has caused this probrem. What ever happened to the Lottery commissions that are supposed to fund our education. Maybe the government should make these money sucking lottery CEO’s pay off the millions of debt for education. That is what the lottery was suppose to be for any way. I know I spend my share on buying Lottery tickets, and yet I never hear of those who actually benefit from the Lottery, except those who win $640 million dollars and don’t know what to do with the money. Well I myself have had student loans and was fortunate to pay most of them off. Although, I would have loved to benefit from some of the scholarship money from all these phony organizations who claim you can get money to go to school free. I think the Lottery funded education scheme is a joke as well as with most scholarhips. Only selected persons benefit from these programs. Just a thought.

diddy

April 3rd, 2012
1:16 pm

I just never understood why poeple attend 4 year colleges and major in no money subjects like psychology, socialogy, and communications. There is a 90% certaintly that you will have to go to grad school and get even more in debt.

Then there are the for profit schools that swarm the less educated making them think they will have employment options when they graduate. You really have to do your homework (literally) and do a strategic plan on how to develop your career.

Dave

April 3rd, 2012
1:20 pm

Nothing is ‘free’, Young and Foolish. Sad that you don’t know that yet. Will the professors work for ‘free’? Will the contractors build the classrooms for ‘free’? No? Then someone is paying. By ‘free’, you apparently mean ‘I don’t have to pay for it’.

Dave

April 3rd, 2012
1:30 pm

Guy – subsidizing medical school won’t reduce the cost of our health care system. It will just shift part of that cost from doctors to taxpayers.
If you want to reduce the cost of our health care system you need to:

- get rid of the 3rd-party payer process we have now. The 3rd-party payer system encourages frivolous overuse of healthcare resources because the people using those services aren’t paying the true cost of it.

- Return health insurance to the same state as other types of insurance – covering major, unexpected medical conditions like heart attacks, cancer treatments, grevious injuries, etc.

- Have people pay out-of-pocket for routine things like doctors visits, routine medications, birth control, etc.

Ted Greenhand

April 3rd, 2012
1:32 pm

Well college is a business. They should be taxed on any profits and contributions. The real problem is what these kids are learning (Or not learning). By and large college professors are loafers who can’t actually do so they teach. This is because they don’t want the stress of producing something. So yes we are in real straits here. None of these kids can get jobs with these phony degrees. Anything is liberal arts is a complete rip off. So sure I can see a major meltdown when the kids figure out that they will never have it as good as we did. The fact that they will spend a life time paying off college debt for no real gain. Also the fact that they have been cheated by liberals and Democrats and now have to pay the tab. Yes the good old America is over. Its time to pay the tab kids.

Dave

April 3rd, 2012
1:34 pm

Oh – one other major thing I forgot: drastically reduce government interference in the health care industry. The bloated, beuracratic (spelling?) regulatory state does nothing to make us healthier, and drives up the cost of doing business in the health care industry.

Keep laws against fraud and such, of course, but the nanny state micromanaging of every little thing makes life a daily pain-in-the-hindquarters for medical industry staff and takes away from the time and resources they would otherwise spend treating patients.

Interesting Observation

April 3rd, 2012
1:35 pm

Ray Tardinski

April 3rd, 2012
1:13 pm

Dude, you are a pathetic human being.

Too CoooL Like that

April 3rd, 2012
1:37 pm

I totally disagree with the statement about no money subjects. I have a bachelor’s degree in Psychology and make a six digit figure. Your education is just the icing on the cake that gets you to the next level. It always a matter of who you know and who likes you that gets you a good paying job. Degrees no matter what the subject is just your priority. So back off of the comments about psychology, sociology majors. Yes, like any other field, you can’t get a physicians lisence until you go to Medical School or a liscence to practice law until you get your JD degree. So a bachelors in any field holds practically the same weight. HOLLA

zeke

April 3rd, 2012
1:37 pm

with chinese applications for graduate degrees in america rising like crazy per wsj, how about we charge them like they charge us for our imports to their country…tax the heck out of them and use that to lower student loan interest rates for american students

Josh

April 3rd, 2012
1:38 pm

I struggled to pay of my student loans so I suppose there will be a bailout program to help those who are delinquent now that my loans are paid off. I am sure my tax dollars will subsidize this effort. I had 71K in loans when I graduated and my first job paid 30K yet I managed over 18 years to pay them off so why should we bailout people who don’t want to pay their loans back? It’s not that people can’t make their payments it’s rather they would like a new car and iPads, etc. No bailout. No way!

NO Interesting Observation

April 3rd, 2012
1:38 pm

Leave Ray alone. He is trying to get Obama elected. I like Obama as well. I don’t want a job when I graduate.

Ray Tardinski

April 3rd, 2012
1:42 pm

Pathetic because I speak the underlying undeniable truth.

Gene

April 3rd, 2012
1:48 pm

The problem is not so much majors at the University of Georgia and colleges with high admission standards. It is two and four year colleges that have no admission standards. About 10 years ago, Sonny Perdue and his hand-picked BOR, eliminated the SAT requirement for two year colleges in Georgia. This allowed an influx of students who had little ability and no motivation to graduate. College became a paid vacation after highschool The state college where I was a professor in Georgia had over 90% of the student body receiving Pell Grants and Stafford Loans. Revenue and enrollment skyrocketed, and the only requirement for admission seemed to be the ability to draw breath. Students were carried for three semesters, essentially without passing any credit courses with some devious manipulation by the registrar and administration. Most of these students had no intention of ever repaying the loans and viewed the loans as a goverment entitlement. I taught at another state university where the problem was identical. This university had a graduation rate of 7% for African-American males and an overall graduation rate of around 20%. These institutions were aware of the problem but continued to focus on easy enrollment and federal dollars. In neither instance were Federal guidelines followed concerning attendance in class and recovery of funds. In my most recent employment, students were returned cash stipends for unused book purchases. Approximately a third of my students maintained that they couldn’t afford textbooks, but they had state of the art cell phones. Colleges presidents and administrators must be held accountable for graduation rates and default of Federal loans. Financial aid is not a right guaranteed to all high school graduates. The presence of students who consider college a paid vacation disrupt the learning process for serious students.

Too CoooL Like that

April 3rd, 2012
1:49 pm

I agree with Josh. I have paid my share of student loans off as well. However, I do feel that there should be a program to help those struggling to pay, by eliminating some of the outrageous interest rates that have accrued. Also there should be more programs to allow low payments and at the same time award or supplement the loan with other low financing tools. ( I still feel the lottery should provide the portion they promise). For those who are struggling to pay off student loans here is a tip that helped me. I purchased my first home and consolidated my student loans with the mortgage payments. I have done this atleast three times and it has worked. I have purchased three homes and with each mortgage prospect I was able to borrow enough to pay off student loans. But in the mean time you must keep your student loan payments current. Working on my Masters degree and plan to do the same.

simple simon

April 3rd, 2012
1:54 pm

You received the money when you asked, most have been not paying back for years, even while gainfully employeed. Some treaied student loans like free money they did not actually owe back. Well, now the time has come to pay back so that others may have the same opportunity. Sorry you didn’t take this obligation as serously as you should have, but you still owe the American taxpayers well over 1 trillion. Time to pay up.

Not White

April 3rd, 2012
1:58 pm

I am so thankful to God that I dropped out of college. Had I stayed in college, my career path would be earning me a best of $60k (after years of experience of course) and I would have tons of student loans.

Thank Jesus that I dropped out and realized you don’t need a piece of paper to do well in life. Now I make six figures and have sex with super models. The super model part is a lie, but I do earn more than twice most of my college graduate friends.

Of all the friends that I graduated from high school with, I think only a couple are even close to my range.

Not White

April 3rd, 2012
2:00 pm

I hear a lot of kids not finding jobs after college. Their plan is to go to grad school. How well more education help them? I’m surprised parents actually let their children do thing like this. You think by now people would realize that experience is way more important than education. In fact, I hate working with fresh college (I’m only 27) because of their attitude of entitlement.

Not White

April 3rd, 2012
2:01 pm

@Josh – I am glad and proud of you for paying off your student loans. I think the problem is that you had $71k in loans. I hope that education at least earns you that in a year.

Not White

April 3rd, 2012
2:03 pm

@ Too Cool – yes, great idea. Take more debt to pay off debt and then roll it into more debt. I’m glad it worked for you, but I’m pretty sure Dave Ramsey would slap you for suggesting that to other people.

Shar

April 3rd, 2012
2:05 pm

Colleges and universities have been immune from market realities due to the availability of federal student loans and federal grants, so they have jacked up prices and ignored efficiencies.

Any such institution that increases the total cost of attendance (no trading tuition for “fees” or bouncing up room and board instead of tuition – all costs including books should be grouped) above the rate of inflation should become ineligible for federally-backed student loans or grants, as should all that graduate fewer than 60% over 5 years.

Not White

April 3rd, 2012
2:09 pm

@ Shar – I agree, but it’s business. They aren’t providing education to kids, they are earning money from customers.

Boss Hawg

April 3rd, 2012
2:17 pm

Kids already get enough indoctrination K-12 we don’t need more of our tax dollars to fund your snowflake’s Social Justice Liberal Arts degree, we need to get back to the three R’s in this country if we are going to stay ahead of the China-men.

MrLiberty

April 3rd, 2012
2:19 pm

Federally-guaranteed student loans are the root cause for the rising costs of college. I know, that sounds counterintuitive, but when you make that much money available (courtesy of the Federal Reserve printing press) you encourage colleges and universities to charge more or at least discourage them from cutting costs to keep prices down. The same thing happened in housing, tech stocks, etc. We need to abolish the Federal Reserve, restore sound money, encourage savings with market based interest rates (rather than artifically low Fed-set rates) and we can restore our economy. People need to decide for themselves whether or not college is right for them and should not be enticed with low cost loans. Get the government out of the economy and things will work right – and that includes bailouts to banks, guaranteed loans, subsidies, tax breaks, income taxation, and everything.

mike

April 3rd, 2012
2:21 pm

Its ok Ray Tardinski. I don’t see you making a mark in this world other than hating on the President and a world renowed school. I don’t see what the debt problem is. The American people in one way or another have allowed this situation. Maybe they can start putting folks into office who have at least a small interest in our children’s education.

KYHA

April 3rd, 2012
2:29 pm

Yes! I think about this every night. It has become a living nightmare for some of us. Yes I have student loan debt…way over 25k I hav emy grad degree and I am severally under paid. I didnt major in art or dance studies but I dang sure had a plan..I saw a career that I wanted did what I needed to do to get the job and here I am…student loan debt and underpaid and working towards absoultely nothing as of this point. And I tell you what pisses me OFF! See all these atlanta-natives with no degrees working government level jobs making 6 figures. Thats why Atlanta government is so jacked up! The truth is scholarships are scarce…and to agree with a previous comment there was not one guidance counselor that introduced the idea of being a pharmacist, engineer, forensic accountant..etc real careers with prospect…Instead they let these teenagers go to college, live on campus buy these expensive meal tickets..etc that causes debt to pile up. The truth is if you dont need the refund money. SEND IT BACK..too bad I didnt realize that until now
Finally, there is no reason why anyone should go into to student loan default. Its as simple as picking up the phone and calling your debtor. Make a payment arrangement or deferrment. There are several income based programs you can qualify for to make your loan payments affordable. The moral of my story is ..Give me a great paying job and I will swiftly pay my student loan debt with NO problem!

True

April 3rd, 2012
2:33 pm

@Diddy…I majored in one of those “no money areas” and you are right. I have so much student loan debt because I kept deferring and deferring and the interest piled up. Then I consolidated and what was $55,000 in student loans (undergraduate and graduate) has grown to over $149,000 due to fees and collection charges from the agency that services my loan…yes I DEFAULTED! Now they want over $1,000 per month for the next 9 months to rehabilitate my loan. I HAVE to do it if I want a shot at cleaning up my credit. Even though I was in default, they were garnishing over $750 a month from my paychecks!

But I curse the day I EVER signed on the dotted line and took ONE DIME of student loan money!

Too CoooL Like that

April 3rd, 2012
2:35 pm

To you Not so white, I never suggested anyone do this. It won’t work for those who cannot manage their money. I only stated this helped me, and for your information I own four homes and three are paid for. So the slapping comment is back to you.

KYHA

April 3rd, 2012
2:38 pm

@ too cool like that…Glad it worked out for you. sometimes its up to the individual. You have ppl who went to med school and failed out AND still stuck with student loans…

Too CoooL Like that

April 3rd, 2012
2:44 pm

Just as anything in life, when you make a purchase you have to pay the cost. If you buy a $50,000 automobile, for which I see a lot of in Atlanta, you have to pay for it or it will get towed. When you decide to go to college you know you have to pay for college either self pay, student loans or scholarships. You start planning your future the day you enter college not when you graduate. Atleast when I wen to college and I have been to three colleges. Each degree I paid 1/2 from student work study, borrowed a little and paid back what I owed while I was attending school. That way my student loans never exceeded $15,000 per degree. Take an economics course at some time in college or a finance course and you will learn about managing student loans and the cost of education.

diddy

April 3rd, 2012
2:46 pm

@ Too Cool,

I’m happy your making a 6 figure income with you psycology degree but that is not the case for 90% of people who major in that. And as far as rolling your student loans into your mortgage… not sure that’s a good idea or even possible based on the way mortgages are tied to appraisals.

@ Not White, I’m glad you are making money without college but I think it’s a bad move to drop out. I was just like you. I quite college to pursue a business. It did well then went down hill. I went back to school, got my degree’s, now I’m good.

Doofus

April 3rd, 2012
3:03 pm

To Dumb Ray Tard -

Morehouse is a Private Institution. Most of their income is from private donors. Do your research.

Facts that hurt

April 3rd, 2012
3:12 pm

A generation kept outta the economy, no first new car, no first condo, no business suits, vacations, entertainment, there spending has dropped by 70%. it’s a missing generation in the economy, the jobs that the normally would fill are gone or pay a third of what they used to. The American life style has changed, the future we thought we were entitled to is gone. Get used to it, it will be different.

It's all Relative

April 3rd, 2012
3:15 pm

And when you realize that student loans can be used for other expenses besides tuition, like Apple computers and laptops, you will realize that the public has not just been cosigning on education costs, but lifestyle choices.

Not White

April 3rd, 2012
3:15 pm

@ Too Cool – i wasn’t slapping, just saying that what worked for you is not common for everyone else and should definitely not be suggested for the masses.

Too CoooL Like that

April 3rd, 2012
3:23 pm

To Diddy, I agree with you. That most people don’t get a great paying job with a Bachelors Degree. I actually have two Bachelor’s Degrees and three associate degrees. Now working on my Masters Degree. However, I plan to make atleast $250,000 per year at time I grad with my Masters Degree. Getting a job is hard for anyone with or without a degree. But during my first year in college when I received my first associates degree, a financial advisor gave me the smartest tip that I have taken with me through my career journey. She told me that you get the job first, let the job help you pay for college, and get promoted in the field of work you do. I followed her advise and I think that is why I did so well. I have been in the field of work for more than 20 years and each degree I earn, my job pays tuition assistance, I borrow a little and pay some on my own. Each degree I get promoted. Not trying to give any advices or make suggestions, I think we all have our ways of making it in this society, I took all the advice I could. So what works for me may not work for someone else. Because of this I was able to keep my student loans at a minimum and not go into default or just neglect making payments. Yes the mortgage companies saw that I was a financial responsible person so it was not problem. BAD CREDIT is BAD CREDIT no matter how you look at it. Student loans, homes or cars. They all require a loan. A loan is just that, a loan which means it has to be paid back.

UGA Parent

April 3rd, 2012
3:29 pm

FMy son graduates in May from UGA with a degree in Psychology.He has accepted a job waiting on him making 52,000.00 Yr. He has no student debt and will apply for graduate school after a year of working.He (with my start up help) at three years old invested in stocks and bonds with birthday and Christmas monies.His graduate degree cost will be paid by his investments.He does not come from a rich family and he did work in high school part time to pay for his living expenses(except rent) in Athens.Hope fund and a good plan in advance helped. By the way,we have sent five childern to college and zero debt for us and them.It can be done if you sacrifice and set goals. FYI Industrial and organizitional Psychology is in demand at major corp.Georgia Tech offers a masters and doctors in this subject.So does UGA !!!

White Rabbit

April 3rd, 2012
3:33 pm

It’s too bad so many people think the only value of education or the main goal of life is earning money. Naturally, one works to earn, but hopefully one studies or trades in what one loves and is able to put that to good use. I earned a Ph.D. in English at a major university and accrued less that $10K in loan debt (I had it paid off in no time), then I got a job as a professor of literature here in Georgia–I make a good wage and save, I like what I do, and I do my job well and help people, and I travel a lot. I think it should be remembered that the most important thing teachers make is *a difference*, but we are still underpaid and that should be redressed. And I would add that for those who feel that their “range” is measured in money, well, I guess it is then, and in that case they had better have a whole lot of it.

Too CoooL Like that

April 3rd, 2012
3:34 pm

No problem, Not white, It did come across kind of harsh. And I realize that what works for me may not work for everyone. I was merely trying to pass along how I have been blessed enough to deal with the same issues here. Just trying to share what helped me. Some one who is just entering college may find this information resourceful. If so, all is good. If not so be it.

Kim

April 3rd, 2012
3:38 pm

It’s not the money borrowed that is the only problem, it’s the INTEREST. I borrowed heavily (& way too much) to get my doctorate; was in & out of college for 20 years!! By the time I repay my loans (and I will), I will have paid 3x what I borrowed. Capitalism gone way wrong. Same thing with the housing industry; everyone has/wants to make a buck, but come on!!!