• 1 in 5 households now owes student debt, new Pew Research study shows

    Forty percent of U.S. households headed by someone younger than age 35 owed student debt in 2010 – double the percentage from 20 years ago, according to a new Pew Research Center analysis that found a record one in five households hobbled by student debt.


    “We know the total amount of student debt has been rising, but what this study does is help us get a handle on who owes it,” said Richard Fry, a researcher with the Pew Center.

    Outstanding student loans have topped $1 trillion, and rising tuition costs have spurred colleges and students to call for reforms.

    “It’s been a hard labor market for everyone, but particularly for 18- to 20-year-olds, who have not been able to find work or find work in their qualified field,” Fry said.

    View the Pew Research Center's complete report (Pdf)

    Households headed by someone younger than age 35 have by far the highest share of the debt among the age groups, Fry said.  He said 70 percent of the total debt was owed by households headed by those under age 45. 

    Among households owing student debt, the average outstanding student loan balance edged upward to $26,682 in 2010 from $23,349 in 2007, data show.

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    Fry said incidence of student debt increased in nearly every demographic and economic category since 2007, but households with incomes less than $21,000 were hardest hit.

    “While households with higher incomes also had student debt, they were able to shed other debt obligations,” he said.  

    Other key findings:

    • In 2010, nearly 90 percent of the debt was owed by households whose head had completed at least some college education and almost 70 percent was owed by households whose head had finished college.
    • In 2009-10, 51 percent of full-time, first-time undergraduate students had a student loan; that was up 43.5 percent in 2006-2007.
    • Most debtor households had less than $50,000 in outstanding student debt in 2010, but the share of households owing elevated amounts increased. For example, in 2007, 10 percent of student debtors owed more than $54,238. By 2010, 10 percent of student debtor households owed more than $61,894 (figures are adjusted for inflation).

    The study released is based on the Survey of Consumer Finances, conducted every three years and sponsored by the Federal Reserve.

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  • Drowning in student loan debt? Here's help

    Jacquelyn Martin / AP

    Gan Golan, of Los Angeles, dressed as the "Master of Degrees," holds a ball and chain representing his college loan debt.

    By Herb Weisbaum, The ConsumerMan

    As college students start the fall semester, millions of graduates (and drop-outs) struggle to pay off a mountain of student loan debt – more than $1 trillion dollars, according to the Student Loan Debt Clock. That’s more than all the credit card debt Americans owe.

    College seniors who graduated with student loans in 2010 owed an average of $25,250, according to the latest data from The Project on Student Debt. That’s up five percent from 2009.

    And these days, a college degree doesn’t guarantee employment, let alone a good-paying job.

    “You don’t realize the seriousness of paying back that loan until you finish school,” said Langdon Bueschel of Seattle, who needed financial aid to attend the University of Washington.

    When he graduated in 2008, Bueschel had a degree in English and $12,000 in student loan debt. He has a job designing online advertising, but most of his money goes to living expenses. Because he missed so many payments, his balance now stands at $18,000 and counting.

    “I could have been more responsible and paid more quickly,” he admitted, “but sometimes things come up.”

    The most recent report from the U.S. Department of Education found that more than 320,000 borrowers had defaulted on their student loans as of September 2010. That is, they were 360 days or more late in making their payments.

    Can’t handle your student loan payments?
    You may have options and there’s an easy way to find them. The Student Debt Repayment Assistant on the Consumer Financial Protection Bureau (CFPB) website can help students – and their families – figure out the best repayment options and what to do if they’re behind in their payments.

    “You just answer a few questions and we’ll be able to point you to the best repayment program or action you should take in order to best manage your debt,” said CFPB student loan ombudsman Rohit Chopra.

    First, you need to know what type of loans you have – government, private or both – because the remedies are different. Not sure? The Student Debt Repayment Assistant has a link to the National Student Loan database where you can find out.


    “We can lead you in the right direction for the income-based repayment program on federal loans and we can tell you how you might negotiate with your private student lender,” Chopra explained. “Let’s say you’ve fallen behind like so many people have, we can even tell you about ways to negotiate with debt collectors and maybe even get your credit report fixed so you can get back on track.”

    Of course, nothing’s guaranteed. But your chances of modifying the repayment terms are fairly good with a student loan from the federal government. Private lenders are generally not as willing to help. Still, it’s worth a try. 

    “Options vary by lender, but many private student loan programs offer borrowers a partial forbearance during which the borrower makes interest-only payments for a short period of time until the borrower can get back up on his or her feet,” said Mark Kantrowitz, publisher of FinAid.org and Fastweb.com. “This keeps the loan balance from growing bigger and digging the borrower into a deeper hole.” 

    Kantrowitz points out that some private lenders may make reductions in the loan balance or interest rate when the hardship is of a more permanent nature and they know they are unlikely to recover the full amount owed.

    Think Ahead
    Headed to college and in need of financial assistance? Then consider this advice from the Consumer Financial Protection Bureau: take advantage of all federal loans before you apply for private loans, especially those with variable rates. 

    Remember: it is virtually impossible to discharge any type of student loans in bankruptcy. This obligation stays with you forever. 

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  • Mounting student loans a 'debt bomb' waiting to explode

    By Herb Weisbaum, The ConsumerMan

    It’s a vicious cycle. Many families in this country cannot afford the skyrocketing cost of higher education without student loans. But many graduates cannot find a job and cannot pay off the loans. As a result, they wind up in a much deeper hole (as the interest and collection fees accrue) with no way out. 

    Student loan debt in the U.S. now totals more than $1 trillion. That’s more than all the outstanding credit card debt in the country.

    A recent report by the National Association of Consumer Bankruptcy Attorneys found that both students and parents are borrowing at record rates. 

    College seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Parents had an average of $34,000 in student loans for their children. The report says the number of these parental loans has jumped 75 percent since 2005-2006. 

    “These are enormous numbers,” says Ike Shulman, a bankruptcy attorney in San Jose, Calif.  “They’re basically setting us up for having a large number of fellow citizens become economically non-functional for the rest of their adult lives.” 

    Growing numbers of people are being crushed by this debt -- unable to pay and unable to get relief. A recent nationwide survey of bankruptcy attorneys by NACBA found that most (81 percent) had seen a spike in the number of people with student loan debt looking for help. But in most cases, there is nothing a lawyer can do. 

    Current law makes it almost impossible to discharge student loan debt through bankruptcy. And unlike other unsecured debt, there is no statute of limitations on student loans. Lenders can pursue borrowers to the grave. 

    “It’s not fair and it needs to be corrected,” says NACBA president William Brewer. “It is a debt bomb that could cripple our society.” 

    The association’s report says the country faces a serious economic threat from this growing mountain of student debt, one that could be every bit as devastating as the mortgage meltdown. 

    “This will be a drag on the economy for the foreseeable future,” warns John Roa, an attorney with the National Consumer Law Center and NACBA’s vice president. 

    It’s a problem for students and parents who co-signed loans
    Dave Ingham, a disabled Vietnam veteran who lives in Minneapolis, fears he could lose his savings and his house because he co-signed student loans -- now in default -- for his son. Ingham is being sued by collectors. 

    His son Shannon has been unable to find work since October 2009. He’s now been diagnosed with acute anxiety disorder and depression. He’s still looking for work, but his father says the loan defaults keep him from getting hired. 

    “It seems that whenever he comes close to a job interview, they run a credit check, see his loan defaults and the interview does not proceed,” Ingham said at a recent telephone news conference arranged by NACBA.  

    Can something be done?
    With student loans backed by the federal government, someone in trouble can try to get the payments deferred or modified. There are even loan forgiveness programs.  With private loans, it’s pay or end up in default. 

    The National Association of Consumer Bankruptcy Attorneys wants a “safety net” under student loans, just as there is for other consumer lending. 

    If you start a business that fails, they point out, you can file for bankruptcy and go on with your life. But college students -- or their parents -- don’t have the same protection. 

    “We need to make some common sense reforms, something like creating an escape valve to relieve some of the pressure before the whole thing blows sky high,” says NACBA vice president John Roa. “There’s no way to diffuse this bomb if the status quo remains the same.” 

    NACBA wants Congress to roll back the bankruptcy code to 1978, when borrowers who couldn’t pay off their student loans (private or government-guaranteed) could discharge that debt in bankruptcy. 

    Rep. Steve Cohen, (D-Tennessee), has introduced a bill, H.R. 2028: Private Student Loan Bankruptcy Fairness Act, which would treat private student loan debt the same as other consumer debt. 

    Congressman Cohen says his bill would “restore fair treatment to Americans in severe financial distress” and give “an honest but unfortunate debtor a chance for a financial fresh start.” 

    The bill is supported by the American Association of Community Colleges, the American Association of State Colleges and Universities, the American Council on Education and the American Federation of Teachers, as well as various consumer groups. There is currently no formal opposition.

    The idea of making it easier to discharge student loan debt via bankruptcy will not sit well with those who backed bankruptcy reforms passed in 2005. Clearly, getting the law changed is a long-shot. 

    Dave Ingham says he doesn’t know how to solve the current situation. But he believes something should be done before others face the same financial ruin he does. 

    “It’s something that’s really out of control,” Ingham says. “There are thousands and thousands of us out there who need help with this situation. Please do not give up on us.” 

    Read:  NACBA report and member survey on student loan debt  

    Find helpful information at: StudentLoanBorrowAssistance.org 

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