We now need to see serious thought about moving the system away from this unsustainable funding burden. Graduates now stand to pay back twice, through their studentloan repayments and as taxpayers confronting the spiralling costs of this ill-considered scheme. Sally Hunt from the UCU added that the government had rushed through the establishment of a loan repayment system without doing the proper maths. She said: We may well end up with the taxpayer footing a larger bill for students education than before students had to pay 9,000 a year fees. It is time for a rethink. Shadow universities minister, Liam Byrne described the student loans system as unsustainable and said it was likely to go bust. This is because universities are sitting on flimsy foundations, he clarified, we now need urgent answers from the government for how theyre going to fix this 80bn mess which our country cannot afford.
According to a December study by the Institute for College Access & Success, 7 out of 10 students in the class of 2012 graduated with student loans, and the average amount of debt among students who owed was $29,400. Theres no clear end in sight. The total amount of student debt is growing basically at a constant rate, Wilbert van der Klaauw, an economist with the Federal Reserve Bank of New York tells TIME. The inflow is much higher than the outflow, which is likely to continue in the future as reliance on student loans for college is expected to remain high. Debt is painful for many students, and an increasing number of graduates are unable to pay back their loans on time. Delinquencies on student loans have risen dramatically over the past decade: 11.5% of graduates were at least 90 days late on paying back their loans at the end of 2013, compared with 6.2% delinquencies on student loans in 2003. Moreover, the Feds figures on delinquencies hide morestarkdata: nearly half of all students with debt arent currently in repayment thanks to deferments and forbearances and the fact that students are not expected to pay while theyre in school, according to van der Klaauw.
But data and government reports indicate the phenomenon is real. The Education Departments inspector general warned last month that the rise of online education has led more students to borrow excessively for personal expenses. Its report said that among online programs at eight universities and colleges, non-education expenses such as rent, transportation and miscellaneous items made up more than half the costs covered by student aid. The report also found the schools disbursed an average of $5,285 in loans each to more than 42,000 students who didnt log any credits at the time. . Even when schools suspect students are over-borrowing, they are restricted by federal law and Education Department policy from denying funds.
The long-term impact of student-loan debt
The same warning goes with a private refinance, of course. You will also want to check on prepayment terms. While federal loan consolidation allows prepayment at any time, this may not be true with private lenders. Check interest rates carefully Getting a lower interest rate is likely high on your priority list, and this is where a private refinancing can be the most helpful. Although you can probably consolidate your federal loans through the government, the interest rate will be fixed at the weighted average of the group of loans being combined, rounded up to the nearest one-eighth of a percent.
Iuliano’s research showed that those who represented themselves were about as likely as those who had lawyers to win their cases. Bankruptcy attorney Sommer said few borrowers are prepared to argue their cases in court against skilled and often aggressive lawyers representing their creditors. “Most people are not capable of doing that,” Sommer said. “This is full-scale litigation.” The bar is certainly high. A borrower has to prove that repaying his or her student loans would be an “undue hardship.” Typically, that means meeting three tests: a current inability to pay the loans, because doing so wouldn’t allow you to maintain a minimal standard of living given your current income and expenses; a future inability to repay the money, because your financial situation is likely to continue; and a good-faith effort to repay what you owe. In two recent decisions, though, courts granted relief to borrowers who hadn’t made voluntary payments on their debt and who refused to enroll in income-based repayment plans.
But not everyone in student-debt distress is eligible for refinancing. Generally, you need to be in a better economic position, with a better credit score, than you were when you took out the loan. Lack of awareness about federal loan deferral and forgiveness is also a problem. THE WAY FORWARD One area of emerging consensus is that lenders should stop making loans without consideration of borrowers’ ability to repay. Clearly, it’s difficult to measure a 17-year-old’s earning potential, but, analysts say, that doesn’t preclude responsible lending.