Posts tagged ‘Debt’

September 19, 2011

Impact of staggering growth of student loans on our children’s future

by Grace

Here’s a chart based on New York Federal Reserve data for household debt. The red line shows the cumulative growth in student loans since 1999. The blue line shows the growth of all other household debt except for student loans over the same period.

The 511% growth in student loans since 1999 is staggering and unsustainable.  And here’s the scariest part when I consider my children’s future.

All this college debt could put the U.S. on a slower growth path in the years to come. As Americans grapple with high student loan payments for the first few decades of their adult lives, they’ll have less money to spend and invest. All that money flowing into colleges and universities is being funneled away from other industries where it would have been spent in future years. Of course, this would be a rather unfortunate irony: higher education is supposed to enhance a nation’s growth, but with such an enormous debt burden, graduates might not be able to spend and invest enough to allow that growth to occur.

Source:  Chart of the Day: Student Loans Have Grown 511% Since 1999, The Atlantic

August 17, 2011

Student loan debt climbs while all other household debt falls

by Grace

Americans have cut back on credit of all kinds, with one notable exception.

According to the Federal Reserve Bank of New York’s quarterly report on debt and credit, U.S. households had $11.42 trillion in debt outstanding in the second quarter. That was down from a peak of $12.5 trillion in the third quarter of 2008, when the financial crisis took hold, and the lowest since the first quarter of 2007. Mortgage debt, home equity loans, credit card debt and auto loans are all down sharply — partly because people are being more careful, but also because many have defaulted.

But student loans are up sharply. There was $550 billion in student debt outstanding in the second quarter, up 25% from $440 billion in the third quarter of 2008.

It’s worth noting that student loan debt cannot be discharged through bankruptcy.

Student Loan Debt Climbs – WSJ

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August 12, 2011

Affluent parents should make their kids pay some college costs

by Grace

new study from Bank of America reports that 47% of Americans with more than $250,000 in assets won’t pick up the full cost of their kids’ college degrees.

I’m actually surprised that it’s not a higher percentage.

Twenty-nine percent of respondents said that limiting their financial support for their kids’ educational expenses would teach them responsibility.

Zac Bissonnette, author of Debt-Free U: How I Paid For An Outstanding College Education Without Loans, Scholarships, or Mooching Off My Parents, writes that working is preferable to taking on debt.

There is considerable research that suggests that working during college will not hurt academic performance and may actually improve it. And, it can give students valuable work experience that will help them land jobs later on.

But there are also unwise ways to make your kids help pay for college….  Debt is too abstract to really impact a student’s approach to college. You’re not helping your kid by making him borrow a bunch of money for college; in fact, you may be pushing him into a debt load that will leave his career options deeply constrained when he graduates — forcing him to take the first thing that comes along (to make payments) rather than being able to plot a long-term career based on abilities and interests.

If you want to teach your kid responsibility, do it with work, budgeting, and short-term sacrifices — not debt.

I’m not picking up the full cost of my children’s college education, having always considered work experience to be of great value for young people.  There’s also some student loan debt in my kids’ future.

August 10, 2011

College tuition ‘sugar daddies’

by Grace

Saddled with piles of student debt and a job-scarce, lackluster economy, current college students and recent graduates are selling themselves to pursue a diploma or pay down their loans. An increasing number, according to the the owners of websites that broker such hook-ups, have taken to the web in search of online suitors or wealthy benefactors who, in exchange for sex, companionship, or both, might help with the bills.

The past few years have taken an especially brutal toll on the plans and expectations of 20-somethings. As unemployment rates tick steadily higher, starting salaries have plummeted. Meanwhile, according to Jeffrey Jensen Arnett, a professor of psychology at Clark University, about 85 percent of the class of 2011 will likely move back in with their parents during some period of their post-college years, compared with 40 percent a decade ago.

Besides moving back home, many 20-somethings are beginning their adult lives shouldering substantial amounts of student loan debt. According to Mark Kantrowitz, who publishes the financial aid websites and, while the average 2011 graduate finished school with about $27,200 in debt, many are straining to pay off significantly greater loans.

Enter the sugar daddy, sugar baby phenomenon….  With the whole process going digital, women passing through a system of higher education that fosters indebtedness are using the anonymity of the web to sell their wares and pay down their college loans.

“Over the past few years, the number of college students using our site has exploded,” says Brandon Wade, the 41-year-old founder of Seeking Arrangement. Of the site’s approximately 800,000 members, Wade estimates that 35 percent are students. “College students are one of the biggest segments of our sugar babies and the numbers are growing all the time.”

Jack is a sugar daddy who says he is “helping” these women.

“Most of these young women have debt from school,” says Jack, who finds most young women also carry an average of $8,000 in credit-card debt. “I guess I like the college girls more because I think of their student debt as good debt. At least it seems like I’m helping them out, like I’m helping them to get a better life.”

Consistent with its reputation of offering loan-heavy financial aid, New York University ranks highest with the number of sugar babies.

At The Huffington Post’s request, Seeking Arrangement listed the top 20 universities attended by sugar babies on the site. They compiled the list according to the number of sugar babies who registered using their .edu email addresses or listed schools’ names on their profiles. New York University tops the list with 498 sugar babies, while UCLA comes in at No. 8 with 253, and Harvard University ranks at No. 9 with 231. The University of California at Berkeley ranks at No. 13 with 193, the University of Southern California ranks at No. 15 with 183, and Tulane University ranks at No. 20 with 163 college sugar babies.

Click on the image to get more details from the interactive image.

Seeking Arrangement: College Students Using ‘Sugar Daddies’ To Pay Off Loan Debt – Huffington Post

July 11, 2011

Education debt correlates with higher self-esteem for young people

by Grace

Young people “experience debt as empowering,” according to a study, and the effect is strongest for people who come from the poorest families.

Researchers looked at the responses of 3,079 people from 1979 to 2004, in the National Longitudinal Survey of Youth. They ranged in age from 18 to 34, although most were in their early-to-mid 20s. The survey included data about credit-card and educational debt, and measures of respondents’ self-esteem and sense of mastery.

For students from families in the bottom 25% of income, self-esteem and perceived mastery rose steadily with both educational and credit-card debt. The education itself didn’t drive the rise in self-esteem; given two people with the same demographics and schooling, the one with higher debt had higher self-regard. Similar but less-consistent effects were found for students from families in the broad middle income ranges.

Only at age 28 did educational debt (though still not credit-card debt) become a drag on self-esteem.

Something kicks in around age 28, maybe common sense?

Wall Street Journal  –  “Youth Debt, Mastery, and Self-Esteem: Class-Stratified Effects of Indebtedness on Self-Concept, Rachel E. Dwyer, Laura McCloud and Randy Hodson, Social Science Research (May)

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