Remember the housing bubble? Remember how it popped and sent our economy into a tailspin? Well we are creating another one. This bubble is in the Student Loan world. I work for a company that is in the financial industry and a part of my job is reading industry blogs. This last week I have seen an increase in the number of blogs on student loans. This caught my attention.
While I have been very fortunate to receive financial aid and then worked hard to make up the balance of my school bills so that I will graduate debt free, the vast majority of my fellow students are graduating with HUGE student loans. I hear them talking about how loans of $30,000 to $50,000 aren't that bad and I cringe. In my world that is a lot of money! I can't imagine having that burden on my shoulders.
The delinquency rate on student loans is up 80% from 2003. The total amount of student debt is up from $241 billion in 2003 to $956 billion this year. (Unibul) With the total amount and the delinquency rate rising so rapidly economists are estimating that we may soon have another financial crisis on our hands.
How do we avoid this? We all need to take responsibility for our finances and not borrow beyond our limits. Whether it is signing for a home loan or a student loan that you can't afford to pay back. We also need to look into the loans that we sign up for and make sure that the loan underwriting is solid and do our research on the different types of loans out there. This way we can know which loans to avoid.
It is time for us as consumers to be financially responsible. Even if it isn't a large loan that you are looking at it may be a credit card. Whatever it is know your limits. Don't spend beyond your means. Debt shouldn't be taken on unless you have a solid plan for repaying it. Obviously there are times when the unexpected happens and catches us off guard, but we need to be responsible players in the debt industry. Do your research. Know what you are signing up for and know if you can actually repay or not. It is easy to blame others for our situation, but we all need to take responsibility and do our part to be responsible citizens.
I think the major problem is people are not financially responsible. I agree that most borrow beyond their limits, but it is what they are doing about it once they graduate. People are looking for a way out of their decisions once they realize the full impact of their loan. People wait till the last minute to start paying them off and then looking to the government to implement ways of getting out of it. People such as yourself, work hard to graduate debt free, but sadly so much of our country is looking for free handouts and loopholes to get out of things.
ReplyDeleteI agree that many people are wanting an easy way out of debt. I just read today that a new proposal is before congress in order to deal with the student loan situation. This new initiative would make it so that student loan payments are taken out of people's paychecks much as taxes are. It would be based on your income and would have a maximum cap of 15% of your income after cost of living is calculated. This would also make it so that if you lost your job you wouldn't have payments and if you get a higher paying job your loans will get paid off faster. They would also cap interest at 50% of the total value of your loans at the time that you graduate. So, if you owe $27,000 at the time of graduation your interest would never be more than $13,500. This would be an interesting fix to the problem.
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