Young adults, when asked if they have college loans, often just sigh or groan quietly.
But how much does this debt really matter to their lives? Conflicting trends make this difficult to answer. College graduates have ample time – decades of employment – to pay off their student loans, economists argue, and they’ll bring in more earnings to pay them back. A college education is worth $1 million in extra earnings over a lifetime.
Behind the student-loan sigh is anxiety that the post-Great Recession job market makes it tougher for many graduates to earn what they need to pay their loans back. Indeed, the rate of delinquencies has risen in tandem with increased borrowing. Payments on half of all student loan accounts are now being deferred, the consumer credit firm TransUnion reported last week, and these deferrals are the first step to still more delinquencies.
Some researchers are warning about the additional financial risks facing graduates with large loan balances. “That didn’t happen in previous generations,” said Ohio State University’s Lucia Dunn, whose study published last month in Economic Inquiry found that young adults are on a path to having far more credit card debt in middle age than did their baby boomer parents. Credit cards, student loans – debt of all kinds – she said, “is just an overwhelming burden for many young people.” … Learn More
Women with large student loan balances are less likely to marry than their girlfriends who’ve graduated debt-free, new research shows.
Men, in contrast, are immune to this impact. Their marriage prospects are the same regardless of how much they owe for their education, according to Fenaba Addo, who studied the effect of college and credit card debt in the “marriage market.”
As U.S. college debt outstanding has surpassed the $1 trillion mark, the fallout is widening. Recent graduates complain that paying off their student loans affects their ability to take critical steps to improve their future finances, such as buying a house or saving for retirement. But there are psychological effects too: young adults who carry a lot of debt, for example, are more stressed, even depressed.
It was only a matter of time before student loans started messing with their love lives.
Addo, now a post-doctoral fellow at the University of Wisconsin’s Department of Population Health Sciences, became interested in the topic as she watched her girlfriends taking on “crazy amounts of debt” to finish college or complete graduate degrees… Learn More
As delinquencies by college graduates have increased, so have their personal financial risks: 15.1 percent of loans originated in late 2010 are now delinquent, up from 12.4 percent of late-2005 loans, according to a January report by FICO, creator of the credit score. More students are also delaying their loan payments.
“This situation is simply unsustainable,” warned Andrew Jennings, head of FICO Labs. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”
American Student Assistance (ASA) is a non-profit that helps college graduates with the complex task ofmanagingtheir loans. Debtpreventionis the best course of action, and an increasingly urgent one for students. For those who are already in debt, clickherefor how to call an ASA counselor. Click “Learn More” to read a May 2011 article about ASA. …Learn More
This blues lyric by Buddy Guy probably sums up your reaction to news that debt can make you depressed.
But what’s also true is that one’s reaction to debt hinges on what type of debt the person has – and not all debt is depressing. Further, people approaching their retirement years and those with less education who are in debt are more likely to get the blues, according to new research.
Lawrence Berger, an associate professor of social work at the University of Wisconsin in Madison, determined that a 10-percent increase in the dollar amount of an individual’s debt increases his or her depressive symptoms by 14 percent.
To be clear, having debt does not lead to full-blown clinical depression. But it does trigger the garden variety blues that most people experience. Symptoms vary from losing one’s appetite or being unable to shake the blues to feeling lonely…Learn More
Consumer Reports says 13 percent of Americans are still paying off credit cards that they ran up to buy 2011’s holiday gifts.
That may be one reason more Americans plan to budget this holiday season – 52 percent – compared with last year’s 41 percent, according to Consumer Reports’ national survey. Among those who bought their 2011 gifts with credit cards, 58 percent paid them off by the end of January and another 13 percent in February – hats off to them. But the rest waited. Some are still waiting.
I can relate.
In the interest of encouraging Squared Away readers to reveal their financial failings in the comments area below, here’s one of mine: a credit card balance averaging $2,500 for more than 20 years. It’s embarrassing, and yes, this personal finance blogger knows why it’s important to pay off a credit card charging nearly 15 percent interest – what a waste of a few thousand dollars I could’ve put in my 401(k), for instance…Learn More
Admissions policies and financial aid packages at individual colleges – not just tuitions and fees – are significant determinants of student loan levels, according to new research.
No wonder there’s a cottage industry of financial planners who specialize in counseling families on college admissions: this granular – and often invisible – information about financial aid is critical to whether your child carries a burdensome debt load with his diploma on graduation day.
The media and policymakers – and (Squared Away adds) parents – “have assumed that tuition and university sticker prices are the primary if not the sole factor driving the rise in student indebtedness,” James Monks, an economist in the University of Richmond’s Robins School of Business, concluded in an October paper. “This assumption ignores the substantial impact that college and university admissions and financial aid policies” have in determining debt levels.
Certainly parents should pay attention to tuition and fees. But Monk found that public college admission policies that are blind to students’ financial circumstances produce students with “a higher average debt upon graduation,” which tends to fall on their lower-income students. When a college says that it is “need-blind,” it is saying that it looks at each student’s financial situation only after deciding whether to admit him or her based on test scores, grades and letters – this policy is typically aimed at increasing enrollment of low-income students. After agreeing to accept a student, the institutions try to help those who need it most through their financial aid packages. But this aid often falls short, requiring heavy borrowing by students.
In contrast, the target of some private institutions is to maximize the number of students graduating with no debt or limited debt. At institutions with such policies, Monks found that students have significantly lower debt levels than institutions that lack this policy.
Danielle Schultz, a straight-talking Evanston, Illinois, financial planner said most public colleges claim to be need-blind in selecting their incoming freshman class. But at a time when state budgets are tight, far fewer now have the financial resources to back up such a policy, she said, which drives up borrowing by their students. As for private colleges, she said they’re also feeling financial pressure and believes that fewer institutions than in the past can afford to maintain generous no-debt policies.
Rising debt levels is the result. U.S. college graduates had $26,600 in student debt last year, up 45 percent from 2004, according to a new report by the Institute for College Access and Success.
Schultz, who just successfully shipped her daughter off to college – Bryn Mawr outside Philadelphia – describes college application as a treacherous process rife with pitfalls.
“Schools are in the business of forking over the least money possible to get the most motivated kids and the most diversity,” she said. The onus is increasingly on parents “to think hard about what kind of dollars they are willing to fork over.” These days, it’s about the major: can the student get a job after college? Her rule: don’t borrow more than the student can expect to earn the first year after graduation…Learn More