Sacramento, CA – Another trend that seems to be emerging nowadays is the student loans bubble. More and more students are getting deeper into debt each year. This year alone the estimated unpaid student loans are expected to exceed $1 trillion.
Inflation is one of the culprits why students are borrowing higher amounts of money. In 2010, students (full time, undergraduate) loaned an average of $4,963. This is a 63% spike from the average loaned amount a decade ago. Most of the debt owed in America today is due to student loans which have taken over mortgage and credit card debt.
The scary part about this is that, the amount being borrowed is increasing and the default rate is also increasing meaning more students are defaulting on their student loans. On a nationwide scale, about 8.8% of the student population had defaulted on their loans this is based the most recent federal data.
In California alone, 8 % of student borrowers or 1 out 12 students defaulted within 2 years of obtaining their loans (some didn’t even bother to pay at all). The schools that had the highest defaults were the for-profit colleges.
What these students don’t realize is that they really could not escape their student loans. The borrow and run method may sound like a good idea now but sooner or later the debts will come back to haunt you and with even bigger consequences. Most of the loans that were taken out were federal student loans (easier to get, lower interests, longer repayment plan and very, very tough consequences if you default). Student debts unlike credit card debts are not easily dischargeable in bankruptcy. Student loans cannot be included in Chapter 7 but can be included in a payment plan in Chapter 13; but, you still have to pay the remainder afterwards.
To reduce the rate of defaults, California is even drafting legislation to sanction schools that have above 24.6 default rates and has more than 40% of their enrollees who are under federal student loans will not be able to receive Cal Grants. This could in turn lead to stricter financial requirements for students trying to enter college.
With the recession still in full swing, a student’s life is so financially difficult nowadays. Having low income and overwhelmed with debts, most students are delayed in being able to buy their own cars, their own house or even get married in the time that they are expected to because they will be busy slaving themselves to pay off their student loans.
Quoting Nick Pardini, a Villanova graduate student, the student loan bubble is going to create a generation of wage slavery and when that bubble bursts, the debtors will be the ones getting the short end of the stick.
College education was supposed to be an investment, the key to the good life but with the rates and consequences of student loans, by time a student graduates, he/she will be in deep debt. The best thing that the student can do is to minimize the amount that they need borrow and work their butts off during their college days to pay off their student debts so that when they graduate the burden will be a little less. It’s okay to miss out on those wild college parties because you may end up with a hangover that could last a lifetime.
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