According to a recent USA Today report, student loan defaults are at their highest rate since 1998 and appear to be headed even higher going forward.
Perhaps in anticipation of high student loan defaults, the government has made it next to impossible to default on a student loan through the execution of a bankruptcy action. A curious move when consumers who spend unwisely and elect to put themselves in bankruptcy and can sometimes gain relief from indebtedness through a bankruptcy action.
Peter Mazareas, Vice President of the College Savings Foundation stated that, “it is going to be a generational challenge in terms of current students who are maxing out their indebtedness.”
They are coming to grips with the unpleasant reality that they may be paying $1500 to $2500 a month in student loans. For the first time in America, student loan indebtedness has surpassed total credit card debt. Because college tuition has far outpaced inflation for the past 20 years, student borrowing has continued to increase and increased by an astounding 25-percent last year.
Parents have been a contributing factor in the college equation. Contributing parents may have lost their jobs or have had to retrain for jobs with lower salaries that have left them unable to assist with college debt.
Historically some parents took home equity loans in support of college and now with home value being downgraded they are less able and likely to take these loans.
In addition, parents may have lost substantial amounts from their retirement accounts when the stock market tanked. Now these same parents are trying to rebuild retirement accounts based on the premise that you can borrow from college you can’t borrow for retirement.
According to some figures, the average student is graduating with $30,000 in college loans and many will owe substantially more.
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