Student loan debt and student loan default is one of the most serious problems facing the country’s long term recovery and health, and it is increasingly in the news. I’ll post frequently about this topic.
For today — a recent New York Time’s article reports:
In all, nearly one in every six borrowers with a loan balance is in default. The amount of defaulted loans — $76 billion — is greater than the yearly tuition bill for all students at public two- and four-year colleges and universities, according to a survey of state education officials.
In an attempt to recover money on the defaulted loans, the Education Department paid more than $1.4 billion last fiscal year to collection agencies and other groups to hunt down defaulters.
Further, as stated there:
There is no statute of limitations on collecting federally guaranteed student loans, unlike credit cards and mortgages, and Congress has made it difficult for borrowers to wipe out the debt through bankruptcy. Only a small fraction of defaulters even tries.
The average default amount was $17,005 in the 2011 fiscal year. Borrowers who attended profit-making colleges — about 11 percent of all students — account for nearly half of defaults, while dropouts were four times as likely as graduates to default. A loan is declared in default by the Department of Education when it is delinquent for 360 days.
You have a child, or niece, nephew or know your friend’s child — and you want the world for that child, including a good education. The rules of this new world are different, and those caring for children and their higher education can help first by understanding better what the current reality is.
For more on this topic, see this guest post, What happens to your kids’ education and educational loans if you are in bankruptcy? By Victoria Maydanik, San Jose bankruptcy attorney in California, and owner of Maydanik Law Firm.