Follow us on Twitter @AJCBiz
Despite signs that the economy appears to be on the rebound, many consumers continue to struggle under the weight of debt they can’t pay off, especially when it comes to student loans.
Equifax reported Monday that student loan charge-offs, debts that creditors deem uncollectible, rose more than 36 percent to $3 billion in the first two months of the year, compared with the same period a year ago. When debt reaches that stage, lenders usually turn to collection agencies to get the money they’re owed.
High unemployment among recent graduates – and underemployment among those have been able to land a job – is hurting their ability to put dents in student debt. That, combined with credit card debt and mortgages, makes the problem more acute.
According to Forbes, the size of the average student debt load in 2005 was $17,233, but that figure had climbed to $27,253 by 2012, a 58 percent increase.
“Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs,” Equifax chief economist Amy Crews Cutts said in statement on the charge-offs. She said the company is seeing a steady growth in lending to students.
Scott Scredon of Atlanta-based CredAbility, a consumer credit counseling service, said 15 percent of the group’s clients have a mix of mortgage, credit card and student loan debt.
“Student loans have been a problem for a while,” said Scredon, a CredAbility spokesman. To help some clients, the group works with lenders to try to restructure as much of the mortgage and credit card debt as possible.
Equifax said the balances outstanding on student loans rose more than 14 percent to $852.7 billion in January and February, compared with the period a year earlier. The number of student loans outstanding rose nearly 13 percent to more than 123 million.
Have ever you had to just walk away from a debt, leaving a creditor to charge it off, and has that debt ever come back to haunt you?