Archive | 2:19 pm

The Great American…Loan

18 May

 

People in the United States owe a lot of money on credit cards. In fact we owe about 700 billion dollars in credit card debt. The only thing we’ve borrowed more money for is home mortgages… but home mortgages aside, who owes more than adults when it comes to borrowing money?

It’s school kids! And although technically they are school adults, if you have 1 or 2 or more of them in your home they are still kids to you…but still, the number one debtor in the United States today are young adults who have taken out loans from the federal government to finance their college education.

Student loan debt has gone over 1 trillion dollars…as in 1 followed by 9 zeros, and the federal government has just forecast a record 51 billion dollar profit this year from student loan borrowers. That’s more than the earnings of the nation’s most profitable companies.

Who knew? Did you?

But the good news? In July the 3.4% interest rate that students are paying on borrowed money now will jump to 6.8% …unless of course Congress passes the “Student Loan Affordability Act” which is proposed legislation that would keep existing interest rates… on some student loans… for the neediest households, fixed at 3.4 percent. However, The bill does nothing for existing student debtors….and besides who doesn’t smell a filibuster in the air?

The Department of Education…that much maligned government entity that oversees our crumbling school system and that also gave us the “No Child Left Behind Act”, has generated almost 120 billion dollars in profit over the last five years from student loans which ironically enough, is the only kind of consumer debt that has increased since the onset of the financial crisis.

And get this… Apparently officials in Washington are now worried that perhaps overly indebted student borrowers will be unable to save enough to purchase a home, take out loans for new cars, start a business or save enough for their retirement…and become, you know…productive American citizens.

What is it that we expected would be the rewards of plunging our children into massive debt? Talk about not leaving a child behind?! What about leaving adults behind?!…before they even get started!

And for some reason these adult/children/student borrowers are also finding themselves unable to refinance their loans even if they graduate from college and secure well-paying jobs, even though  most other borrowers are able to refinance debt at quite low rates. And why is that?

Because these loans have become so profitable to lenders thanks to the Bankruptcy Reform bill of 2005 when both federal and private student loans became non-dischargeable during bankruptcy. This has turned student loans into credit risk free loans for the lender. (with a debtor who literally has a lifetime to repay it) The loans are just too good for any respectable financial institution to give up…as any gambler could tell you, ¬†they’re a sure thing!

Getting a higher education is a wonderful achievement but once again with the help of our nation’s love affair with capitalism, we’ve turned a good thing into a profitable thing and that profitable thing into a must thing…and with ever escalating college costs happily jumping on the bandwagon, (because if you can’t afford this much it’s just as easy to not afford that much!)…this thing is spiraling out of control.

Our children are literally taking loans out on the American Dream, which is being dangled in front of them like a candied carrot on a stick, with money they do not have and may not ever have… and in what may be the most sinister twist of fate…all of their government loan filing and debt approval makes them perfect candidates for…

credit card approval once they’ve graduated.

GRACEFIFTEENTEN

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