Suprime student loans crisis 2011? 40% of borrowers were delinquent within a five year repayment win
Many students, whether or not they graduate, have debt burdens approaching or exceeding $100,000. If repaid over 30 years, it's a $500,000 obligation, and if default, much more because debts aren't forgiven. As a result, once entrapped, escape is impossible. Bondage is permanent, and future lives and careers are impaired or ruined.
Congress ended bankruptcy protections, refinancing rights, statutes of limitations, truth in lending requirements, fair debt collection ones, and state usury laws when applied to federally guaranteed student loans. As a result, lenders may freely garnish wages, income tax refunds, earned income tax credits, as well as Social Security and disability income to assure defaulted loan payments. In addition, defaulting may cause loss of professional licenses, making repayment even harder or impossible.
Moreover, under a congressionally established default loan fee system, holders may keep 20% of all payments before any portion is applied to principle and interest due. A borrower's only recourse is to request an onerous and expensive "loan rehabilitation" procedure, requiring extended payments (not applied to principle or interest), then arrange a new loan for which additional fees are incurred.
As a result, for many, permanent debt bondage is assured. In addition, no appeals process allows determinations of default challenges under a process letting lenders rip off borrowers, many in perpetuity.
At issue is a conspiratorial alliance of lenders, guarantors, servicers, and collection companies enriching themselves hugely at borrowers' expense, thriving from extortionist fees and related schemes. It's a congressionally sanctioned racket, scamming millions of indebted victims.
Moreover, lenders thrive on bad debts, deriving income from inflated service charges and collection fees. They're more than ever today as default rates soar, lifetime rates now nearly one-third of undergraduate loans, higher than for subprime mortgages. In fact, they're higher than for any other lending instrument and rising.
Soaring Defaults During Hard Times
Since America's economic crisis began in late 2007, an April 21, 2009 Wall Street Journal (WSJ) Anne Marie Chaker article highlighted the burden on students headlined, "Student Loans: Default Rates are Soaring," saying:
The combination of economic weakness, rising tuitions and poor job prospects caused defaults on student loans to skyrocket. According to Department of Education numbers for those federally guaranteed, estimated FY 2007 default rates reached 6.9%, up from 4.6% two years earlier.
Conditions are now far worse according to a February 4, 2011 Mary Pilon and Melissa Korn WSJ article headlined, "Student-Loan Default Rates Worsen," saying:
They "rose to 13.8% from 11.8% for students beginning repayment in (FY) 2008 compared with those starting a year earlier," according to new Department of Education data.
They measure defaults within the first three years of repayment. Over their lifetime, however, they approach two and a half times that level, perhaps heading for 50% if economic conditions keep deteriorating while tuition and fee rates rise.
Students at for-profit schools fare worst at 25%, but sharp tuition increases at public and private nonprofit universities place greater burdens on their graduates, assuring rising defaults, especially over their lifetime.
Moreover, rising levels may cause many colleges to become ineligible for government-backed Pell Grants and other student loans. To qualify, they formerly had to show less than 25% of students defaulting within a two year window. If they breached that threshold for three consecutive years, or hit 40% in a single year, they could lose out altogether.
Congress ended bankruptcy protections, refinancing rights, statutes of limitations, truth in lending requirements, fair debt collection ones, and state usury laws when applied to federally guaranteed student loans. As a result, lenders may freely garnish wages, income tax refunds, earned income tax credits, as well as Social Security and disability income to assure defaulted loan payments. In addition, defaulting may cause loss of professional licenses, making repayment even harder or impossible.
Moreover, under a congressionally established default loan fee system, holders may keep 20% of all payments before any portion is applied to principle and interest due. A borrower's only recourse is to request an onerous and expensive "loan rehabilitation" procedure, requiring extended payments (not applied to principle or interest), then arrange a new loan for which additional fees are incurred.
As a result, for many, permanent debt bondage is assured. In addition, no appeals process allows determinations of default challenges under a process letting lenders rip off borrowers, many in perpetuity.
At issue is a conspiratorial alliance of lenders, guarantors, servicers, and collection companies enriching themselves hugely at borrowers' expense, thriving from extortionist fees and related schemes. It's a congressionally sanctioned racket, scamming millions of indebted victims.
Moreover, lenders thrive on bad debts, deriving income from inflated service charges and collection fees. They're more than ever today as default rates soar, lifetime rates now nearly one-third of undergraduate loans, higher than for subprime mortgages. In fact, they're higher than for any other lending instrument and rising.
Soaring Defaults During Hard Times
Since America's economic crisis began in late 2007, an April 21, 2009 Wall Street Journal (WSJ) Anne Marie Chaker article highlighted the burden on students headlined, "Student Loans: Default Rates are Soaring," saying:
The combination of economic weakness, rising tuitions and poor job prospects caused defaults on student loans to skyrocket. According to Department of Education numbers for those federally guaranteed, estimated FY 2007 default rates reached 6.9%, up from 4.6% two years earlier.
Conditions are now far worse according to a February 4, 2011 Mary Pilon and Melissa Korn WSJ article headlined, "Student-Loan Default Rates Worsen," saying:
They "rose to 13.8% from 11.8% for students beginning repayment in (FY) 2008 compared with those starting a year earlier," according to new Department of Education data.
They measure defaults within the first three years of repayment. Over their lifetime, however, they approach two and a half times that level, perhaps heading for 50% if economic conditions keep deteriorating while tuition and fee rates rise.
Students at for-profit schools fare worst at 25%, but sharp tuition increases at public and private nonprofit universities place greater burdens on their graduates, assuring rising defaults, especially over their lifetime.
Moreover, rising levels may cause many colleges to become ineligible for government-backed Pell Grants and other student loans. To qualify, they formerly had to show less than 25% of students defaulting within a two year window. If they breached that threshold for three consecutive years, or hit 40% in a single year, they could lose out altogether.
Source...