A discussion of student loan debt from a couple weeks back:
Without action from Congress, interest rates on federal Stafford loans will double (from 3.4% to 6.8%) on July 1st. Ned Resnikoff reviews the political playing field:
If this all sounds vaguely familiar, it’s because Washington had a similar fight last year. That was when Congress first extended the law which keeps student loan rates fixed at 3.4%, after President Obama made an issue of it during the 2012 campaign. Though that law did lighten students’ debt burden a bit, it did little to slow the years-long explosion in student debt. This year, total student debt passed the $1 trillion milestone.
Nancy Folbre worries about the implications of the increase in student indebtedness:
As Robert Kuttner explains… bailouts and bankruptcy proceedings both provide a means for businesses to get out from under bad debt. The obligations of a college loan, by contrast, “follow a borrower to the grave.” The rolling thunder of accumulating student debt sounds a lot like the perfect storm of mortgage liabilities that threatened major financial institutions and precipitated the Great Recession in 2007.
… Whether or not you call it a bubble, evidence shows something is likely to pop. Both delinquency and default rates have increased substantially since 2005. According to the Institute for Higher Education Policy, only a little more than a third of 1.8 million borrowers who entered repayment in 2005 repaid their student loans successfully without delay or delinquency for the first five years.
Meanwhile, Mandi Woodruff talks to Nicole Jackson, a Florida lawyer who has lost hope of ever repaying the debt she accumulated during law school:
She graduated in 1994 with more than $100,000 of debt. Within three years, she had one daughter, a surprise set of twins, and was earning less than $50,000 per year. “It’s always been a struggle,” she said. “I worked for the state of Florida most of my [career] and the most I was making was $50,000/year. With three kids, it wasn’t enough money.” …
“[My debt] is not going anywhere because I do not make enough money, not because I have just ignored it,” she said. Her private loans took top priority. The payments were only $130/month, but since private lenders don’t offer the same deferment options as federal, it was either pay or roll out the welcome mat for debt collectors. Meanwhile, her federal loans ballooned. With an 8% interest rate, they appreciated even after she consolidated, growing from a principal balance of about $80,000 in 1994 to $186,000 today. Other than her home and a car payment, it’s the only debt she carries to this day.
The Dish 