student loan debt is increasing commensurate with a greater number of students paying higher tuition. Students borrowing money for college have racked up a higher amount of debt than those individuals who have financed any number of things in life with charge cards. In fact, the amount of money individuals while students have borrowed to finance education and its relevant accessories is about to blow by $1 trillion and gain momentum into the future. Student loans, long considered a “good debt,” may morph into a bad debt for graduates faced with decades of student loan payments.
Tuition increases mean a rise in student loan debt
In 1993, less than half of students earning a bachelor’s degree graduated with student loan debt. That number increased to two-thirds by 2008. The average debt students left with in 2009 were $24,000. The total amount of student loan debt is supposed to get to at least $1 trillion in 2011. It is anticipated to continue to grow rapidly. Republicans in Congress want to cut Pell grants, a form of federal financial aid for lower-income students. The states are starting to cut college and university funding right now. Also, tuition is increases at most of these places which may hurt the current generation of college students quite a bit. There has been more than just an increase in student loan debt. Student loan default has also increased. When it comes to having kids in the future and purchasing homes, students may have troubles due to credit damage and the huge student loan payments. Anyone who has children may have to choose between paying off their student loan d! ebt and saving for their children’s college education.
Debt does not have to be bad
Payday loans, credit cards and auto loans are all forms of “bad debt.” Student loans, on the other hand, are considered “good debt” by several. It is considered bad to take out any debt though, now that the recession is done. As long as the degree and salary from that degree are able to effortlessly pay back the debt, school loans are considered good debt even though the College Board explained a four year education is over $37,000 a year now. Most financial advisers suggest that individuals do not borrow more than they could make the year after they graduate. That rule of thumb, however, highlights the risk of taking on student loan debt. Finding a job that pays off the average cost of college with a degree in sociology or history is unlikely. The risk may be lower for fields such as engineering or medicine, however the costs, and the debt, will likely be higher.
Loans aren’t always the answer
The real thing that everybody ought to know when it comes to debt is that if it cannot be paid off, then it is bad debt. Students going to for-profit schools have default rates at about 50 percent currently. Student loans usually can’t be discharged in bankruptcy. Any student loans that are guaranteed by the government could be even worse for you. You will end up having tax refunds withheld, Social Security payments docked or even your wages garnished. The Obama administration did make it easier for student loan debtors stuck in low-paying jobs by forgiving the balance on debt for those who have dutifully paid 15 percent of their income toward their student loans for 25 years – or 10 years if they work in public service.
Information from
New York Times
nytimes.com/2011/04/12/education/12college.html?_r=1&emc=eta1
Creditcards.com
creditcards.com/credit-card-news/does-good-debt-still-exist-1264.php
care 2
care2.com/causes/education/blog/student-debt-for-college-likely-to-exceed-a-trillion-dollars/
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