Let’s actually talk about student loans

There is more student loan debt outstanding — $1 Trillion — than credit card debt! And the government is making a huge profit on it — an estimated 36 percent profit margin, reports the Huffington Postimages-1

“Here’s the real shame: The government gets to borrow for 10 years paying less than 2 percent interest on U.S. Treasury notes, while students must pay 6.8 percent interest on the loans they get from the government!

“The government is ripping off college students, leaving them with a burden of debt that averages $27,000, and for many exceeds $100,000, while they are forced to pay above-market interest rates.

“Students will spend so much time and pay so much interest getting out of student loan debt that most will never be able to afford to buy a home. Today’s homebuyers can get a 3.5 percent, 30-year fixed-rate mortgage. But today’s students may never get to take advantage of today’s low mortgage rates, because the government demands twice that rate to pay off their student loan debt.

“And to make things worse, there is no way to default on a student loan. These loans are not discharged in bankruptcy, and will follow today’s students into their old age, when government will dock their Social Security payments for outstanding loan balances. This is the season for families to take on the burden of student loans, as acceptance letters arrive. But be sure to do the calculations of the overall loan repayment burden so you know the true cost over your lifetime.

“Here are the facts: Rates on unsubsidized Stafford Loans (which accrue interest while the student is in school) are 6.8 percent. On July 1, 2013, rates on subsidized Stafford Loans (which don’t accrue interest until graduation) will jump from the current 3.4 percent back to 6.8 percent. And rates on parental PLUS loans are an astounding 7.9 percent. All are fixed for the life of the loan. Yes, there are options to defer payments, and an income-based repayment plan for those who get low-paying jobs, but the burden of these high-rate loans hang over them for a lifetime, like a mortgage that can’t be refinanced or foreclosed. How did we get into this mess?”

Student loans weren’t always such a bad deal.


More at: http://www.huffingtonpost.com/terry-savage/the-shame-of-student-loan_b_3127099.html

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