Synopsis
- Abc Small
- Abc Normal
- Abc Large
MICHIGAN: The near doubling in the cost of a college degree in the past decade has produced an explosion in high-priced student loans that could haunt the US economy for years.
While scholarship, grant money and government-backed student loans – whose interest rates are capped – have taken up some of the slack, many families and individual students have turned to private loans, which carry fees and interest rates that are often variable and up to 20%.
Many in the next generation of workers will be so debt-burdened that they will have to delay home purchases, limit vacations, even eat out less to pay loans off on time.
Kristin Cole, 30, who graduated from Michigan State University’s law school and lives in Grand Rapids, owes $1,50,000 in private and government-backed student loans. Her monthly payment of $660, which consumes a quarter of her take-home pay, is scheduled to jump to $800 in a year or so, confronting her with stark financial choices. I could never buy a house. I can’t travel; I can’t do anything, she said. I feel like a prisoner.
A legal aid worker, Cole said she may need to get a job at a law firm, doing something that I’m not real dedicated to, just for the sake of being able to live.
Parents are still the priics were radically altered in recent years as tuition costs soared and sources of readily available and more costly private financing made higher education seemingly available to anyone willing to sign a loan application.
Students with no credit history and no relatives to co-sign loans were willing to bet that high-priced loans were a trade-off for a shot at the American dream. But high-paying jobs are proving payday loans KY elusive for many graduates. This is literally a new form of indenture, something that every American parent should be scared of, said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers.
More than $17 billion in private student loans were issued last year, up from $4 billion a year in 2001. Outstanding student borrowing jumped from $38 billion in 1995 to $85 billion last year, according to experts and lawmakers.
Rocketing tuition fees made borrowing that much more appealing. Consumer prices on average rose less than 29% over the past 10 years, while tuition fees and room and board at four-year public colleges and universities soared 79% to $12,796 a year and 65% to $30,367 a year at private institutions, according to the College Board.
Scholarship and grant money have increased, yet for almost 15 years, the maximum available per person in government-guaranteed student loans, which by law can’t charge rates above 6.8%, has remained at $23,000 total for four years.
That’s less than half the average four-year tuition, room and board of $51,000 at public colleges and $1,21,000 at private institutions.
Student loans shoot through the roof in US
Sallie Mae, formally known as SLM, has been on the winning side of the loan bonanza. Its portfolio of 10 million customers includes $25 billion in private and $128 billion in government-backed education loans. However, private-equity investors who had offered $25 billion to buy the company backed out last week, citing credit market weakness and a new law cutting billions of dollars in subsidies to student lenders.
Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, Wachovia and Regions Financial are also big players in the private student loan business. And there has been an explosion in specialised student loan lenders, such as EduCap, Nelnet, NextStudent, Student Loan, College Loan, CIT Group and Education Finance Partners.