Student Debt in the Headlines

Student Debt News

Student Debt News

The issue of growing student debts continues to be in the headlines this week with a number of commentators suggesting the size of loans are a problem for the economy. Recent graduates are often struggling to pay debts and are delaying major purchases and entering into mortgages which affects the entire economy.

Yahoo finance author Mandi Woodruff has posted an article detailing some of the pitfalls of federal assistance and student loans not just the students but the parents as well.

Woodruff cites a family which had decided to help their 4 children with college fees by paying for 1 year tuition for each child. The parents in the Shippen family wanted to provide their children with the same opportunities they had for their higher learning.

However they discovered that they couldn’t get any federal aid to help the children get through college. With three children attending private universities at the same time, limited savings and no assistance available they turned to debt to get their kids through college. The children would have to pay back 75% of the massive $500’000 debt that had accumulated between the three of them. Two of the children managed to pay their loans off eventually.

Long story short, the parents have been left with a $1700 a month bill. That really highlights the kinds of problems that can occur when trying to get your children through college. Read the full story here.

The article highlights some alarming statistics like the fact college costs have increased by 30% in the last 5 years. One third of the student loan borrowers ate old Americans between the ages of 40 and 60, which either reflects mature aged students attending university of parents helping their children. With the college costs being so high, older people often have to use a more aggressive repayment plan, and can easily run into trouble if they lose their job or their child is unable to secure a job and help with repayments.

A more positive story was published by the New York Post which described colleges that allowed students to lower their college debt by working throughout the time of their degree.

The story highlights a number of colleges including Missouri’s College of the Ozarks, Kentucky’s Berea College a California’s Thomas Aquinas College which allow students to work at the institutions and lower their debt.

Students can obtain work in a number of different positions from lunch rooms to libraries, and lower their college debt. A fantastic idea to help students obtain their degree without a mountain of debt. These kinds of programs are a real draw card to those universities.

In other news concerning student loans and debt collectors, a consumer advocacy group has filed a suit under the Freedom of Information Act to obtain information about payment incentives that the Department of Education is offering debt collectors.

The National Consumer Law Center’s Student Loan Borrower Assistance Project aims to provide consumers with information regarding student loan issues, borrower rights and responsibilities. The project relies on the cooperation of loan issuers, but the NCLC claims that the Dept. of Education is refusing to cooperate.

According to the advocacy group, the government paid “nearly $1 billion in commissions” to debt collectors in 2011 and that figure is quickly growing. Many debt collection agencies have recently been busted for deceptive and illegal practices (here also), so the advocacy group is interested in finding out which companies are involved and how much they are rewarded by the government for their debt collection work. Then they could pass this information on to students so they are aware of the penalties involved.

A push for transparency which is well worth achieving.

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