Mounting student loans a 'debt bomb' waiting to explode

[Javaman]

http://bottomline.msnbc.msn.com/_news/2012/02/22/10469504-mounting-student-loans-a-debt-bomb-waiting-to-explode

It’s a vicious cycle. Many families in this country cannot afford the skyrocketing cost of higher education without student loans. But many graduates cannot find a job and cannot pay off the loans. As a result, they wind up in a much deeper hole (as the interest and collection fees accrue) with no way out.

Student loan debt in the U.S. now totals more than $1 trillion. That’s more than all the outstanding credit card debt in the country.

A recent report by the National Association of Consumer Bankruptcy Attorneys found that both students and parents are borrowing at record rates.

Advertise | AdChoicesCollege seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Parents had an average of $34,000 in student loans for their children. The report says the number of these parental loans has jumped 75 percent since 2005-2006.

More at link...

[earthside]

1. This is incredibly serious.

Consider this report:

Student Loans Near $1 Trillion Hurt Young U.S. Buyers: Mortgages - Bloomberg.com
http://www.bloomberg.com/news/2012-02-16/student-loans-approaching-1-trillion-hurting-first-time-buyers-mortgages.html

Roshell Schenck has a Ph.D in pharmacy and earns $125,000 a year, yet can’t qualify for a mortgage for a house for herself and her 9-year-old daughter. The 2008 graduate of Lake Erie College of Osteopathic Medicine, in Erie, Pennsylvania, has more than $110,000 in student debt.

“I’d love to buy and can afford to buy,” said Schenck, 28. Since lenders place closer scrutiny on college loans than in prior years, she says, “it’s almost impossible for me to get a loan. My debt is crushing my chances of purchasing a home." ...

And this:

Student Loan Crisis Busts Retirement Savings - Sharon Epperson/CNBC
http://www.cnbc.com/id/46386779

Parents who borrow money to pay for their children's college education are exacerbating a growing student loan crisis. ...

Parents have an average of about $34,000 in student loans and that figure rises to $50,000, including interest, over a standard 10-year loan repayment period. Interest rates on the most common parental loan — the federal Parent "PLUS" loan — is fixed at almost 8 percent. So the return on parents' investments needs to average at least 8 percent just to break even. ...

This student and parent debt is even more onerous than mortgage foreclosure -- because no one can 'walk away'; no one can find relief in bankruptcy; no one can sue -- you can be impoverished until death if that is what it takes for the lenders to get back their money plus interest. Most folks don't understand this, the collectors can take your house, they can take your retirement, and, yes, they can even garnish your Social Security.

Also a problem is the current official government education policy obsession with encouraging every young person to go to college --- college is not the right pathway for everyone!

With college tuitions continuing to rise out of control (proposed increase for the University of Colorado next year is 9 percent!), I am encouraging young folks that I know to look for alternatives to going to four year institutions ... waiting awhile, working, going to a much less expensive community college, looking for certificate programs, etc.

This student/parent loan debt is a time bomb waiting to go off ... if it isn't seriously dealt with pretty soon, it will kill any 'recovery' and it will further crush what is left of middle class America.

[HughBeaumont]

3. Therein lies the problem . . . .

There's going to come a day where you won't be getting an interview at a less-than-living-wage Target job if you don't have a college degree; never mind office or blue collar (what's left of it here, anyway).

[LiberalEsto]

2. My husband and I are stuck with $49,000 in private student loans for our kids

Neither one finished because of health issues. One can't find work and lives at home; the other barely gets by as a nanny.
We've already paid off some of the loans, but this means there is nothing to save for retirement. There is no way out.

[exboyfil]

4. This is why I am having my daughter finish her Freshman year of

engineering while still in High School. It means somewhere between a $15K to $20K in savings - more than most scholarships will offer. The tuition is less and becomes free once she gets past the district AP offerings. Being 1/2 time college and 1/2 time high school also has some additional advantages. Since college wraps up sooner the student can concentrate on her High School finals.

[XemaSab]

5. I've got a mountain of student loans

Until they're paid off, I'm not going to be able to get a new car or a house.

I've only been working part time for the last few years, and they're not decreasing.