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. College and university trade groups are pushing legislation this year to set lower maximum loan limits for some types of students, such as part-timers.
Are student loan debts setting the stage for the next bubble?
The figure for living expenses is determined by each school and can make it easier to get a student loan than a more traditional loan from the bank. The federal government performs no credit checks for most student loans. An article by the Wall Street Journal examines the rampant use of student loans for non-college expenses. It followed a warning by the U.S. Education Departments inspector general last month about the rising popularity of online education, which has led more students to borrow excessively for personal expenses.
Several recent court decisions have challenged the notion that only the worst-off borrowers, typically those who are permanently disabled, can get education debt erased. The borrowers who won these discharges had low costs, either receiving free legal help or representing themselves. In most cases, borrowers in bankruptcy don’t even ask for help because they figure a discharge of debt is so rare. In one study of 170,000 student loan debtors who filed for bankruptcy protection in 2007, only 51 won full discharges of their debt and 30 received partial discharges. The author of the study, which was published in the American Bankruptcy Law Journal, found that only 213 of the student loan debtors studied even tried to have their education debt discharged by filing what’s known as an “adversary proceeding.” Since bankruptcy law doesn’t allow student loans to be erased in a regular filing, this extra step is necessary before education debt can be discharged.
Student loans were never securitized to the extent that mortgage debt was. Student-loan debt also has warped the economy, contributing to a shortage of primary-care doctors and stymieing entrepreneurship. That doesn’t mean student loans aren’t a drag on the economy as a whole. Analysts say that student loan debt has had widespread economic repercussions. In a report published last year, the Consumer Financial Protection Bureau said student debt is one reason that 20- and 30-somethings seem to be living a prolonged adolescence, including living with their parents, failing to contribute to retirement accounts and postponing big consumer purchases such as cars.
Bankrupt? How to get student loan debt erased
Loans average $750, and a repayment rate of 99 percent, which shows that students will pay back their loans if given the opportunity. As students continue to successfully repay their loans, they are creating that repayment history and opening the door for millions of other students in the future. Beginning on April 2, all student loans sourced by Vittana.org will be posted on Kivas website for crowdfunding rather than on the Vittana website. Visitors will be able to browse through the stories and profiles of students and select one they want to support with a loan of $25 or more. Kiva connects millions of people around the world through lending to alleviate poverty in areas lacking access to traditional banking systems. With as little as a $25 loan, anyone can help a borrower to start or grow a business, go to school, access clean energy and realize his or her potential.
Reuters/Keith Bedford Maybe its just a sign that the markets are getting overheated :Americans are taking out student loans in part to cover everyday expenses. The Wall Street Journal visit homepage reports on this phenomenonin which borrowers are using student loans as stop-gap financing to cover everything from monthly bills to groceries to previous student loan payments.The development is particularly troubling as student loans hit astaggering $1.1 trillion, and as college tuition costs continue to rise . While some of the growth in student loans is attributable to people seeking more education, the Journal explains, these loans are attractive for other reasons too: For one thing, many of those seeking student loans can avoid credit checks. This combination of rising costs and opportunistic borrowers leaning more on ever-growing student debt seems like a recipe for trouble. The only consolation is that the private banking system may emerge relatively unscathed. Thats because the US government, which has basically taken over the student-lending business over the last few years, would be on the hook for bad loans.