You’d be surprised. Student loan debt is painful for anyone to carry. But if you think the greatest debt burden is falling on the poorest students, think again. At a time when the cost to attend some colleges exceeds $60,000, lower middle income students carry more student loan debt, on average, than students in any other economic group, according to a forthcoming study. About 41 percent of click here the 4,400 students in the study left school with some level of debt.
Student Loans… But Only for Some
Take for example the rules that govern so-called troubled debt restructures . Because education loans are uncollateralized, restructuring these for borrowers who would otherwise be unable to make their payments will lead to losses for the lenders that elect to do so. And then theres the matter of the institutions own financing methods. Much of this debtincluding loans that are federally guaranteed (FFEL, for example)has been securitized, which means that its not just the originating lenders that are reluctant to face financial reality, its also the investors who are unwilling to accept anything less than the yields they were promised. But as unsettling as that continues to be, its the direction in which the industry appears to be headed thats just as troubling.
Student loan deal passes Senate
The findings come as Education Secretary Arne Duncan battles accusations that his department tolerates wrongdoing by companies it pays to service federal student loans, most notably Sallie Mae . The nations largest handler of student debt, Sallie Mae is under investigation by at least three federal agencies for allegedly violating borrowers rights . At least one of them — the Federal Deposit Insurance Corporation — has told Sallie Mae it intends to publicly accuse the company of harming borrowers. But the pending investigations and likely enforcement action didnt stop the Education Department from telling Sallie Mae in October that it intends to renew its lucrative contract to service federal student loans. The department told Warren that it was not aware of any issues or findings that would warrant any fines or termination of its existing contract with the company. Poor servicing of federal student loans has contributed to some policymakers fears that the nations $1.2 trillion in unpaid student debt risks curtailing economic growth in the coming years.
Education Department Finds Numerous Problems At Sallie Mae, Levies No Fines
But if you think the greatest debt burden is falling on the poorest students, think again. At a time when the cost to attend some colleges exceeds $60,000, lower middle income students carry more student loan debt, on average, than students in any other economic group, according to a forthcoming study. About 41 percent of the 4,400 students in the study left school with some level of debt. But debt burdens did not decrease steadily as students’ family income rose. The study’s author, Jason Houle, an assistant professor of sociology at Dartmouth, found that students from families earning $40,000 to $59,000 are incurring about $11,000 more in student loan debt than students from families earning less than $40,000. The lower-middle-income students also incurred more debt than students from families earning between $60,000 and $99,000.
Average student loan debt: $29,400
It is expected to become law, with support from the White House and the House of Representatives, which will likely take up the bill in coming days. “This fall, all undergraduates, subsidized or unsubsidized, would only have to pay 3.86% interest rate for the life of the loan,” said Sen. Tom Harkin, an Iowa Democrat, whose support was key to a Washington deal. “That means real savings for borrowers.” It doesn’t apply to loans that students get from private lenders. It only affects Stafford loans, which are made by the U.S. government to help finance a college education.
Guess which students have the highest college loan debt
At the same time that debt has been going up, colleges across the country have been hiking tuition and fees and families’ incomes have been shrinking , student loan debt has risen at an average rate of 6% per year from 2008 to 2012, the report found. Google+ Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer . Morningstar: 2013 Morningstar, Inc.