Private student loan debt reaches $150 billion

Americans have racked up $150 billion in private student loan debt, with many graduates owing more than they can afford, according to a new report from the Consumer Financial Protection Bureau.
Private student loans were aggressively marketed to students before the financial crisis and typically came with fewer protections and higher interest rates than federal loans, the report found.
Defaulted private loans currently total more than $8.1 billion, representing 850,000 individual loans.....

Private student loans used to be dischargeable in bankruptcy like any other consumer debt, but under a 2005 change to the bankruptcy code, private student loans can no longer be discharged unless borrowers can prove undue hardship -- the same rule that applies for discharging federal student loans.
And while federal interest rates are fixed, private loans typically carry varying -- and often higher -- interest rates based on credit worthiness... 

............. By Blake Ellis

Student Loans Once Again In the News

It seems the plight of middle-aged Americans clinging to middle class status deteriorated rapidly in just the few days that we’ve been away, this Wall Street Journal story from Tuesday catching my eye as I quickly leafed through the accumulated newspapers upon our return, primarily as a result of the graphic below. It wasn’t hard to predict this six or eight years ago: “Many parents—no longer able to tap home equity to pay for their children’s education—are taking out new student loans to do so”.

......By Tim

Wall Street-Inflated Student Debt Bubble Hits $1 Trillion; Debtors Rally for Relief

The collective weight of American student debt is a drag not just on those paying the debt, but on our entire economy. 

 

It's hard to calculate exactly, because the lenders are notoriously unwilling to hand over their data, and with students defaulting at ever-higher rates, interest rates and fees are always changing, adding constantly to the weight of the burden college graduates (and those who didn't graduate but still have to pay off the loans they took out in more hopeful times) carry.

How did we get here, with more student debt than credit card debt, with student loans rising twice as fast as mortgage debt at the height of the housing bubble? Recent graduates face terrifying unemployment numbers—ThinkProgress reported that over half of all college grads under the age of 25 are either jobless or underemployed and median wages for grads with bachelor's degrees are down from 2000—and delinquencies on debt is steadily climbing.

Those are complicated issues, because student lending is a complicated industry, one that highlights the degree to which the government is entwined with Wall Street, and state and federal policy play off one another to push students to ever greater levels of borrowing.

The Politics of Debt

Konczal pointed out that the government makes a profit somewhere around 13 percent for each dollar of loans, and because the loans are not dischargeable in bankruptcy and Social Security payments can even be garnished to make them up, default may even be more profitable for lenders than borrowers making payments on time. There's almost no risk of losses, which are the reason for high interest in the first place.

Students and recent graduates with heavy debt loads are at the base of the Occupy movement, and Paul Mason of the BBC has pointed out that the “graduates with no future ” were at the base of Egypt's revolution and the global fight against austerity.

Robert Oxford, a graduate student at NYU researching the financialization of student debt and an organizer with the Occupy Student Debt campaign, pointed out that even government-granted loans mean profits for the banks and the lenders that get paid to service the loans. “Profiteering on student indenture is common financial practice within the realm of Student Loan Asset Backed Securities,” he told AlterNet. “The 'servicers,' third parties the government contracts to bundle its student loans, are essentially middlemen which bring big finance to collateralize millions of American student loans.”

................ By Sarah Jaffe