Student Loans and Government "Help"... Troublesome and Growing Delinquencies

Young people are borrowing money in record amounts to attend college. Some of the heavy borrowers graduate and some don't, but all are on the hook to repay the amounts borrowed with interest.

As a result of its recent takeover of administering an granting student loans to "save taxpayers money," the federal government now makes loans available to virtually anybody who applies for one. And there's always a college willing to take the money for enrolling the student. Colleges needs all the money they can get these days.

Although the student probably doesn't realize it at the time the government backed loan is approved, the conditions are now in place for the student to acquire a lifelong education dealing with finance and indebtedness. Courtesy of the government and the college, he gets the money just for the asking, and that's when the troubling "education" starts. And for the student borrower, it's likely to result in a very expensive education at that.

A new study released yesterday reports on the alarming trend with respect to growing delinquencies on these burdensome student loans.

It's quickly becoming apparent that the recent federal takeover of student loans was a huge mistake. But who can be surprised to learn that? It's simply another example of the government knows best gang and OPM in action.

Student-Loan Delinquencies Among the Young Soar has the worrisome details:

"The number of young borrowers who have fallen behind on their student loan payments has soared over the past four years, the Federal Reserve Bank of New York said in a report released Thursday.

According to the report, 35% of people under 30 who have student loans were at least 90 days late on their payments at the end of last year, up from 26% in 2008 and 21% at the end of 2004.

The new figures, which exclude borrowers who are still in school or aren't yet required to make payments, show that young Americans are having a tougher time repaying college loans as debt loads increase and job prospects remain shaky.

Amplifying the burden: a growing number of young adults have become student borrowers. All told, 43% of 25-year-olds had student debt in the fourth quarter of 2012, up from about 33% in the fourth quarter of 2008. . . .

The high delinquency rate is very worrisome, said Wilbert van der Klaauw, an economist with the New York Fed, noting that higher education has traditionally produced a sizable financial payoff. "We hope the returns to these educational investments are going to be there" as the labor market rebounds, he added.

The amount of U.S. student-loan debt increased 11% last year to $966 billion and is up 51% since 2008, according to the report. Student-loan debt climbed even as other types of borrowing fell.

While 40% of student-loan borrowers owe less than $10,000, a growing number have higher loan balances. Nearly 47% of borrowers owe between $10,000 and $50,000, up from 38% in the fourth quarter of 2005. The share of borrowers with balances of $100,000 or more has also jumped, to 3.7% from 1.7% during this period.

Student-loan borrowers of all ages are struggling to make their payments, according to the Fed report. Overall, the portion of borrowers who are 90 days or more past due climbed to 31% in 2012 from 24% in 2008. . . .

The New York Fed's numbers exclude the roughly 44% of borrowers who don't have to make loan payments, typically because they are still in school or have been granted a loan deferral or forbearance. The share of all borrowers who are 90 days or more past due climbed to 18% in the fourth quarter from 10% at the end of 2004, according to the report."

Summing Up

Government "assistance" in higher education is a huge problem which will only get worse over time.

Free money is like free lunch. There is no such thing. In the end, somebody always gets the bill.

So get ready to "come to the rescue" for many of these student loan obligations, my fellow taxpayers. Even though the indebted students will remain on the hook, we'll be getting the bill when the student loans default. We the People are where the money is. It always works that way with the government and OPM.
 
And we'll be getting the bill because far too many young people have recklessly borrowed far too much money to attend college and are not now, nor will they be anytime soon, in any financial position to repay the money they owe.

Maybe the default will occur because they have no job or perhaps because the job they are able to get doesn't pay well enough to make the loan payments. Or maybe it will be due to the fact that they have taken on too many other debt obligations which need to be satisfied.

But whatever the reason, this student loan fiasco is rapidly getting out of control and becoming a national disgrace. And sadly and unfortunately, for far too many indebted young people, the 'responsibility' horse has already left the barn.

We desperately need to become a nation of 'educated' financial literates and financially responsible citizens. And a nation with a financially responsible group of government officlas as well.

But what we don't need and can't afford is more government "help" in the form of too easy to get and too hard to repay student loan obligations.

That's my take.

Thanks. Bob.