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Published On: Fri, Mar 6th, 2015

Student Loan Debts Are Leaving People No Way Out

The Federal Reserve Bank of New York released its latest “Quarterly Report on Household Debt and Credit,” and one thing is crystal clear: student loan debts are nothing short of a ticking time bomb for the American government and economy.

According to the report, Americans have finally regained enough confidence to begin borrowing large amounts of money again. Total debt balance has increased by one percent to $117 billion, while overall credit scores have seen a healthy improvement over the past year.

But not all the signs are so encouraging. The delinquency rate, which measures the percentage of student loans that are at least 90 days past due, has seen a significant jump. It’s up to a massive 11.3 percent.

photo/Revisorweb

photo/Revisorweb

In other words, more than one out of every 10 people with student loan debt is at least three months behind on his or her payments. That number is up from 8.7 percent in 2009, so it’s cause for concern.

The problem with the current system

In all, delinquent student loan debts have surpassed $100 billion and the number grows larger each day. Mitchell D. Weiss of FoxBusiness.com believes the way society looks at student loan debt is dangerously wrong.

He claims that the situation is even worse than it looks at first glance, and Weiss is calling for a total restructuring of the student loan system. He specifically urges 20-year repayment terms, as well as “allowing borrowers to accelerate their repayments without penalty.”

In his opinion, this would “make it possible for consumers to better control their personal finances without precluding the ability to deal with profoundly troubled debtors on an exception basis.”

An issue for every American

The worst part is, all Americans will eventually be forced to deal with the delinquent debt issue. To begin with, it’s nearly impossible for people to eliminate student loan debts in bankruptcy.

But the burden will eventually fall on US taxpayers if the debt crisis gets out of control and debtors become utterly incapable of paying back what they owe. According to Park View Legal’s Crunchbase page, it’s a mistake to continue letting student loan debt grow.

Not only does it negatively affect an individual’s credit score, but it can have profound on the person’s ability to borrow in the future.

Nick Clements of DailyFinance.com says the true damage is that looming student loan debts are ruining people’s quality of life. “Having defaulted student loan debt that never goes away means that an individual will have limited ability to be a productive member of society,” he writes.

Student loan debt strike

At least one group of student loan debtors is taking action. Fifteen students from Everest College, a for-profit institution that belongs to Corinthian Colleges Inc., announced their intention to boycott their debt in response to what they believe were predatory loans.

There’s certainly a difference between a standard student loan that allows you to get a college education and a predatory loan. But the essential point is that these debts — whether fair and honest or not — are weighing heavily on a country that is only just recovering from a massive financial crisis.

Something needs to be done soon, or we may be facing more trouble in the not-too-distant future.

Guest Author: Lolita Di

 

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- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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