Student Loans Got More Expensive And Debt Piled Higher

That doesn’t include nearly 9 million borrowers whose payments have been deferred due to economic hardship. Studies by the New York Fed found that student loan debt has become a noteworthy drag on the economy. People who are beginning their careers have concluded that they can’t afford auto loans and home mortgages, nor do they want to risk starting a family because of their student loans are devouring their paychecks. Meanwhile the cost of federal loans increased. Last summer, interest rates on Stafford loans for undergraduates went from 3.4% 3.85%.

Student-Loan Debt Slows Recovery

Think thats bad news? It gets worse. Americans facing such an enormous student loan debt burden are increasingly defaulting . The Federal Reserve Bank found that in 2013 more than one in ten student loans were considered delinquent no payment made within the last 90 days a large increase over 7.6 percent delinquent loans a mere five years earlier. Data from the Department of Education agrees. It finds that ten percent of the student loans due in 2011 ended up in default.

Student Loan Defaults Rising, Hurting Recovery

Defaults on those loans are rising . Nearly 12% of all student debt was delinquent by the end of the third quarter, up from 7.6% five years earlier, according to the New York Fed. The Fed defines delinquent as debt that hasnt had a payment in at least 90 days. Because that figure includes debt owed by students still enrolled in school and other borrowers who have been allowed to delay payments, the true scope of delinquency is far bigger. Research by the New York Fed in 2012 indicated more than 1 in 5 borrowers whose loans had come due were delinquent. The Education Departments official gaugethe two-year cohort default rate shows 10% of borrowers whose loans came due in 2011 were in default within two years.

Five Ways Do-Gooders Can Erase Student-Loan Debt

Repaying these loans is a challenge in an economy with high unemployment. Those that do find work often are underemployed with less than full-time hours and low wages. The U.S. tax code does provide some relief for graduates in the form of student loan interest deductions. While interest on loans other than home mortgages is usually not deductable, the tax code provides a special deduction for money borrowed to finance higher (post-secondary) education.
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2013 tax returns: What you need to know about student loan interest deductions

In three weeks I had a very affordable payment. It’s a truly wonderful program.” Yet many overburdened borrowers are still in the dark about the program, said Persis Yu, staff attorney for the National Center for Consumer Law, which runs the Student Loan Borrower Assistance site. “I’m still working with people who don’t know that it exists,” Yu said. Other programs tie reductions in student loan debt to volunteer or military service or to jobs teaching, practicing law or providing healthcare in high-need areas. Those who teach in a low-income elementary or secondary school for five consecutive years, for example, may be eligible to have up to $17,500 in federal student loan forgiveness. Loan repayment assistance programs, available from schools, employers, states and the federal government, help lawyers make their payments.


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