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A New Look at the Lasting Consequences of Student Debt

posted by cmn32480 on Wednesday April 05 2017, @05:22AM   
from the cha-ching dept.

Fnord666 writes:

Recent college graduates who borrow are leaving school with an average of $34,000 in student loans. That's up from $20,000 just 10 years ago, according to a new analysis from the Federal Reserve Bank of New York.

In that report, out this week, the New York Fed took a careful look at the relationship between debt and homeownership. For people aged 30 to 36, the analysis shows having any student debt significantly hurts your chances of buying a home, compared to college graduates with no debt. The cliche of "good debt" notwithstanding, the consequences of borrowing are real, and they are lasting.

The report paints a mixed picture of how student borrowing has evolved over the last decade, since the financial crisis. There are some bright spots: For example, student loan defaults peaked five years ago and have declined ever since.

And repayment seems to have slowed down among high-balance borrowers —those who owe $75,000 or more. Meaning, after 10 years, they have paid down only one-quarter to one-third of what they owe.

On the face, this isn't necessarily good. But taken alongside the decline in defaults, Fed president William Dudley said in a press briefing Monday, it reflects something good. That is, graduate students, in particular, are signing up for government programs intended to help make payments more affordable.

Source: NPR

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Original Submission

• How do student loans work in the US? How do student loans work in the US? (Score: 3, Interesting) by TheRaven on Wednesday April 05 2017, @12:59PM (1 child)

  by TheRaven (270) on Wednesday April 05 2017, @12:59PM (#489108) Journal

  In the UK, your student loan is backed by the government and paid back at a rate that depends on your income (you can overpay, but it rarely makes sense to do so because the interest is at the rate of inflation and you can usually earn more interest than that on other investments). If you reach retirement age without paying it back (which is really hard - you basically have to have either spent a long time unemployed or been working most of your life in a minimum-wage job), it's written off. When you apply for a mortgage, it isn't treated as existing debt, it's treated as a drain on your income, so factors into the amount that you can afford to repay, not the maximum amount that you can borrow. A £30K student loan works out to under £1K/year (plus inflation) over your working life, which is a pretty small amount per month when you're earning even a starting graduate salary.

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  sudo mod me up

  Starting Score:	1		point
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  Extra 'Interesting' Modifier		0
  Karma-Bonus Modifier		+1
  Total Score:		3

• Can't write off; handed out like candy. (Score: 0) by Anonymous Coward on Wednesday April 05 2017, @01:32PM

  by Anonymous Coward on Wednesday April 05 2017, @01:32PM (#489131)

  In the U.S., the federal government doles out loans like candy to anyone who wants one; the more unqualified the student is for higher education, and the less productive the chosen major in question, the better. If you're black and from a family that has been poor for 400 years, then you're encouraged to take on huge debts to attend the most elite universities, institutions which just increase tuition every year because not only is demand artificially boosted, but also because the federal loan program essentially guarantees payment for even the most outrageous costs.

  You don't learn anything in college; instead, after you graduate, you learn how to live as a member of society through on-the-job training as a barista. Through this post-graduate education, you come to realize that your financial obligations are untenable, and that this burden is entirely on your own shoulders: The Federal Government does not allow student loan debt to be included in bankruptcy proceedings; as always, there is no consequence for Uncle Sam's inordinate stupidity.

  Parent