College campuses see a higher number of individuals in the form of students on a continuous basis who accept funds from financial institutions and promise to pay back the money with interest. Borrowing funds for education and the amount owed will reach the $1 trillion level this year after surpassing the total number of dollars owed by charge card borrowers in 2010. Money borrowed while a college student, most always regarded as a “good debt,” is more often becoming a “bad debt” as the cost of paying for an education, and the resultant money borrowed, are called into question as a result of low or negative return down the road for such a risk. Article resource – Student loan debt expected to hit $1 trillion and beyond in 2011 by MoneyBlogNewz.
More students have student loan debt as school costs go up
Student loan debt was something less than half of the students graduating with a bachelor’s degree had in 1993. There was a huge increase by 2008 though. It went up to two thirds. Then the average debt increased even more. By 2009, $24,000 was the average student loan debt a student left with. Total student loan debt is anticipated to reach $1 trillion this year and grow at even faster rate. Lower-income students can get Pell grants for financial aid, although Congress Republicans want to get rid of them. As cash-strapped states cut funding to universities and colleges, tuition increases will add to a mountain of debt that is anticipated to have a profound impact on the current generation of college students. The rate of student loan default is growing quite a bit with the student loan debt. There can be huge student loan payments that have to be made while credit could be damaged if they are not made. This could really hurt students in the future who are attempt! ing to have kids or attempting to buy a house. Those who have kids may have to choose between paying off their student loan debt and saving for their children’s college education.
There is some good debt
Payday loans, charge cards and auto loans are all forms of “bad debt.” Student loans, on the other hand, are considered “good debt” by many. In the aftermath of the recession, any kind of debt has become undesirable. However even as the average cost for a four-year private education has reached more than $37,000 a year, according to the College Board, student loans could be good debt if the degree outcomes in a salary that allows the debt to be paid in a reasonable amount of time. Most financial advisers suggest that individuals don’t borrow more than they could make the year after they graduate. That rule of thumb, however, highlights the risk of taking on student loan debt. Paying down the loans may be unlikely in sociology or history. The jobs for these degrees just aren’t there. The cost of debt is higher for engineering and medicine even though the risk is lower.
Loans are not always the answer
When it comes to good debt versus bad debt, the bottom line these days is simple: all debt is bad if you cannot pay it off. Default rates are rising – to almost 50 percent – among students who attended for-profit colleges. Bankruptcy doesn’t get rid of student loans. For federally guaranteed student loans, the government can garnish wages, withhold tax refunds or dock Social Security payments. Everyone in a low paying job can have the loans forgiven with the Obama administration. He made it so the debt is forgiven in 10 years if you are in a public service position or 25 years for anybody else who pays 15 percent yearly.
Citations
New York Times
nytimes.com/2011/04/12/education/12college.html?_r=1&emc=eta1
Creditcards.com
creditcards.com/credit-card-news/does-good-debt-still-exist-1264.php
care 2
care2.com/causes/education/blog/student-debt-for-college-likely-to-exceed-a-trillion-dollars/
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