[Gunnair]

Quote:

Dismay is growing among educators, economists, parents, and students over what some are calling America’s next bubble: the skyrocketing volume of student loan debt.
“I still have student loans,” David Guard, a graduate of Gettysburg College and American University, told Fox News recently, as lawmakers and the White House bickered over the debt ceiling. “I could see an increase in those interest rates.”

Such fears are commonplace and spreading, as educators, economists, parents, and students watch with growing dismay what some are calling America’s next bubble: the skyrocketing volume of student loan debt.

Figures provided by the Federal Reserve Bank of New York show that since 1999, outstanding student loan debt has grown by more than 511 percent. Over that same period, all other household debt in America – the sum total of all credit card bills, all auto loans, even all mortgage debt assumed during the great housing boom and bust that triggered the financial crisis – grew by about 100 percent.

Rising by $100 billion a year, outstanding student loan debt now stands at about $930 billion, and is expected to reach $1 trillion by year’s end.

“Student loan debt has become a macroeconomic factor; it affects the economy,” said Mark Kantrowitz, publisher of the financial aid website www.finaid.org. “Students who graduate with excessive debt are more likely to delay buying a car, buying a house, getting married, having children, saving for their retirement….They're spending less because they first have to tackle their student loan debt.”

Tackling that debt, at a projected monthly rate of .5 to 1.0 percent of the overall amount due, means that an estimated $5 to $10 billion is being sucked out of the economy each month.

What’s more, the country’s dismal job market leads to rising rates of delinquency and default. Unemployed, and under-employed, college graduates have a tougher time making payments on their student loans; as a consequence, the rate at which such payments are falling more than 90 days past due is on the rise.

“Certainly, students have their role,” Michelle Asha Cooper, president of the Institute for Higher Education Policy, told Fox News. “They’re individual consumers. We need them to make wise and appropriate choices about where they go to school, and their repayment options.”

Experts cited a confluence of factors creating the student loan bubble: larger numbers of college enrollees; rising tuition rates; diminishing pools of grant aid; and sometimes extravagant, and unnecessary, spending by institutions of higher learning, who pass their costs on to student borrowers.

Colleges and universities, said Cooper, “have a responsibility to make sure that they are doing everything possible to restrain college costs.”

But while he agrees the explosion in student debt is cause for alarm, Kantrowitz – who earned bachelor degrees in mathematics and philosophy from MIT and a master’s degree in computer science from Carnegie Mellon University – rejects the application of the term “bubble” to the problem. That, he said, would require an “oversupply of liquidity” relative to the value and cost of an education that is not discernible at present.

Beyond dispute is the value of a higher education diploma, notwithstanding the risks associated with borrowing heavily to obtain it. Federal data last month showed an unemployment rate of under 5 percent for those with at least a college degree, compared with a rate of over 9 percent for those who only have a high school education.

Read more: http://www.foxnews.com/politics/2011/08 ... z1VZjnL8iz

[martin14]

Nahh, we haven't had the credit cards yet.

[jeff744]

It'll only get fixed when banks are faced with enough defaults to put them into serious financial issues as only the rich can afford to put kids through university without debts. If you want to go into anything that will make a lot of money you will also have to be ready to build up massive debts, I know a couple doctors that left university with over 150,000 in debt and they said their situation was pretty common.

[BeaverFever]

I went to Univeristy in the US and one the campus jobs I held while working there was in the Student Accounting office. From my exprience, there were more loans available to students compared to Canada (however, most loans were at market rates and not subsidized as Canadian student loans are). Government-subsidized loans and grants were definitely more plentiful there than in Canada, but most were minimal in terms of the dollar payout, unless you had served in the miltary. Anyway, it was obvious that most of the students I dealth with would be in hoc for years to come.

[jeff744]

BeaverFever wrote:

I went to Univeristy in the US and one the campus jobs I held while working there was in the Student Accounting office. From my exprience, there were more loans available to students compared to Canada (however, most loans were at market rates and not subsidized as Canadian student loans are). Government-subsidized loans and grants were definitely more plentiful there than in Canada, but most were minimal in terms of the dollar payout, unless you had served in the miltary. Anyway, it was obvious that most of the students I dealth with would be in hoc for years to come.

Canada student loans are apparently also restricted by your parents income so if they pass a certain level you are not eligible unless you have lived away from home for a few years. Though I do know of people that spent whatever they had leftover on the loans instead of save it.

[BeaverFever]

Let me give you a personal example: at one point while in school, I opted to apply for student loans in my name, instead of having my recently-divored parents pay for everything and fight over who owes what to whom. As a "foreign" student in the US, I was not eligible for other loans or grants in Canada or the US.

Under Harris-era reforms, I was not allowed to get OSAP because I was going to school outside of Ontario. I could only get Canada Student Loans, but since I was under 24 at the time, CSL considered me to be a dependent of my parents and therefore subtracted a fixed % from my entitlement, which they deem the parent(s) "should" contribute to their childrens' educaction (with no examination of the partents' actual income).

So my mom paid the difference, at no small expense, and claimed me as a dependent on her taxes. Then the CRA (then Revenue Canada) told her that I did not qualify as a dependent since I was not living at home and applied a garnishment to her paycheque to recover the amount she had written off.

So there definitely is a huge disconnect between tax policy and student loan policy. My advice to Ontarians looking to study elsewhere has since been: stay close to home.

[OnTheIce]

Is the problem that school isn't subsidized enough or that the kids of this generation are increasingly irresponsible, taking loans out just to have that extra cash to spend at the club and then bitch about the debt when they're done?

[jeff744]

OnTheIce wrote:

Is the problem that school isn't subsidized enough or that the kids of this generation are increasingly irresponsible, taking loans out just to have that extra cash to spend at the club and then bitch about the debt when they're done?

We pay for I believe 40% of the education costs whereas our parents payed for about 10%. We also have to deal with rising costs of living, our generation is just as responsible about how we spend it, we are just trying to pay off more costs than we can possibly afford.

My approximate income for working what is considered a high paying summer job: ~$8000

Tuition: ~$6700 (UoS Arts and Science)
Books: ~$1000
Rent: ~$4800
Food: ~$1400
Total: ~$13900

I am still short about $6000 despite working a high paying job, saving my money, not squandering, etc. If my parents had no savings I would have about $30000 in debt by the time I graduated.

[BeaverFever]

From my experience with CSL (and later with OSAP when I went back to school again) there isn't much room for "extra cash". For example, after school in FLA I returned to Canada and took a full-time evening course load here in Toronto. The OSAP calculation for that school year went something like this:

1) Your need : $15,000 (calculated by OSAP)
2) Max Possible Loan: $11,900
Your Projected Income: $3,100 (I provided this figure on the app since they require you to indicate how you will make up the dif between 1 and 2)

3)Your Loan amount: $8,800

Of Note:

-Osap subtracted from both ends: The loan is less that the Need but if you disclose how you will make up the dif, they subtract that amount from the loan.

-The need is based on cost of living assumptions for 19-24 year olds: ie, roommates and bunkbeds. If you are an adult with financial responsibilities who is going back to school and not willing/able to bunk with a 19-yr old in a dorm, you're SOL in Ontario.

[OnTheIce]

jeff744 wrote:

OnTheIce wrote:

Is the problem that school isn't subsidized enough or that the kids of this generation are increasingly irresponsible, taking loans out just to have that extra cash to spend at the club and then bitch about the debt when they're done?

We pay for I believe 40% of the education costs whereas our parents payed for about 10%. We also have to deal with rising costs of living, our generation is just as responsible about how we spend it, we are just trying to pay off more costs than we can possibly afford.

My approximate income for working what is considered a high paying summer job: ~$8000

Tuition: ~$6700 (UoS Arts and Science)
Books: ~$1000
Rent: ~$4800
Food: ~$1400
Total: ~$13900

I am still short about $6000 despite working a high paying job, saving my money, not squandering, etc. If my parents had no savings I would have about $30000 in debt by the time I graduated.

So what do you propose, a free education?

Is all student debt bad?

[andyt]

OnTheIce wrote:

Is all student debt bad?

No. Base repayment schedule on the student's post graduation income every year. If s/he can't find a decent paying job, they pay little or nothing, with no interest accruing, but the debt is never forgiven. So once they start earning decent money, they have to make reasonable payments on the debt plus whatever interest rate the govt has to pay.

[BeaverFever]

andyt wrote:

No. Base repayment schedule on the student's post graduation income every year. If s/he can't find a decent paying job, they pay little or nothing, with no interest accruing, but the debt is never forgiven. So once they start earning decent money, they have to make reasonable payments on the debt plus whatever interest rate the govt has to pay.

Current system in ON allows 6 month deferral of payments, but I believe interest accures.

[MeganC]

I thought about loans when I did school and what I did was just go to a school I could afford without loans. I got some scholarships and some grants and then just did that.

[jeff744]

OnTheIce wrote:

jeff744 wrote:

OnTheIce wrote:

Is the problem that school isn't subsidized enough or that the kids of this generation are increasingly irresponsible, taking loans out just to have that extra cash to spend at the club and then bitch about the debt when they're done?

We pay for I believe 40% of the education costs whereas our parents payed for about 10%. We also have to deal with rising costs of living, our generation is just as responsible about how we spend it, we are just trying to pay off more costs than we can possibly afford.

My approximate income for working what is considered a high paying summer job: ~$8000

Tuition: ~$6700 (UoS Arts and Science)
Books: ~$1000
Rent: ~$4800
Food: ~$1400
Total: ~$13900

I am still short about $6000 despite working a high paying job, saving my money, not squandering, etc. If my parents had no savings I would have about $30000 in debt by the time I graduated.

So what do you propose, a free education?

Is all student debt bad?

I'd much rather have it go back to that 10% or so, instead of the constantly increasing rates that will eventually make it impossible for anyone to actually afford it.

[OnTheIce]

andyt wrote:

OnTheIce wrote:

Is all student debt bad?

No. Base repayment schedule on the student's post graduation income every year. If s/he can't find a decent paying job, they pay little or nothing, with no interest accruing, but the debt is never forgiven. So once they start earning decent money, they have to make reasonable payments on the debt plus whatever interest rate the govt has to pay.

Here in Ontario, you have 6 months after you finish school to notify them you have completed your education. During that time, you pay no interest on the Provincial portion..

Following that, you have 15 years to pay off your student loans or you can opt to pay them off faster.

If you have a hard time paying, they offer to help you lower your payments based on your income.

If you can't pay at all because you have no job, you can suspend your payments until your income increases.