student loan debt is increasing commensurate with a greater number of students paying higher tuition. Students borrowing money for college have racked up a higher amount of debt than those people who have financed any number of things in life with credit cards. In fact, the amount of money people while students have borrowed to finance education and its relevant accessories is about to blow by $1 trillion and gain momentum to the future. Student loans, long considered a “good debt,” may morph into a bad debt for graduates faced with decades of student loan payments.
Increases in school costs means increases in debt
In 1993, less than half of students earning a bachelor’s degree graduated with student loan debt. That number increased to two-thirds by 2008. In 2009, college graduates left school with an average of $24,000 in student loan debt. The total amount of student loan debt is intended to get to at least $1 trillion this year. It is anticipated to continue to grow rapidly. Republicans in Congress want to cut Pell grants, a form of federal financial aid for lower-income students. The states are starting to cut college and university funding right now. Also, tuition is increases at most of these places which may hurt the current generation of college students quite a bit. The rate of student loan default is growing quite a bit with the student loan debt. Credit damage, as well as burdensome student loan payments for those who do not default will limit the range of opportunities when it comes to purchasing a home or having children. The choice between saving for a child! 217;s education and paying for own school loans might be one that many parents have to make.
Debt that is good
When it comes to debt, student loans have always been considered “good debt,” as opposed to “bad debt” for instance credit cards, auto loans or payday loans. At the end of the recession, debt became bad altogether. It is now considered bad to take any out. However even as the average cost for a four-year private education has reached more than $37,000 a year, according to the College Board, student loans can be good debt if the degree results in a salary that allows the debt to be paid in a reasonable amount of time. Most financial advisers suggest that people do not borrow more than they could make the year after they graduate. That rule of thumb, however, highlights the risk of taking on student loan debt. It isn’t going to be simple to get a job in sociology or history that pays off the loans. There is less of a risk in degrees such as medicine or engineering. More debt has to be taken out with them though.
It is not always safe to take loans
When it comes to good debt versus bad debt, the bottom line these days is simple: all debt is bad if you cannot pay it off. Right now there’s a huge default rate. In just for-profit schools, the rate is almost to 50 percent. The student loans will never go away. Even bankruptcy cannot get rid of them. Any student loans that are guaranteed by the government will be even worse for you. You will end up having tax refunds withheld, Social Security payments docked or even your wages garnished. Anyone who pays the 15 percent of income for 25 years, or 10 years in a public service position, can have that debt forgiven which the Obama administration has done to help those in low paying jobs.
Information from
New York Times
nytimes.com/2011/04/12/education/12college.html?_r=1&emc=eta1
Creditcards.com
creditcards.com/credit-card-news/does-good-debt-still-exist-1264.php
care 2
care2.com/causes/education/blog/student-debt-for-college-likely-to-exceed-a-trillion-dollars/
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