1
Student loan debt soars to record level
The amount U.S. graduates owe on education loans could become a bigger drag on the economy than the nation's total credit card debt.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
Kai Ryssdal: When we were in Atlanta this weekend, we did a roundtable with a group of seniors at Emory University. Talked mostly about jobs and the election and what it's been like to be in school for four years alongside a weak economy.
But right at the end, we digressed for a bit into student loan debt and how big a deal it was for them. Turns out, it's a pretty big deal.
Here's part of the conversation that didn't make the show yesterday: computer science/engineering major Reginald Extra.
Reginald Extra: I'm definitely worried, I can't lie: I'm graduating with three heavy student loans. I just feel maybe that's also why my push is to get a job so hard and make sure I have something lined up. Because at the end of the day, I don't want to be in a position where it's these heavy bills, and I came to this school to get all these loans, and I didn't get a job out of it to pay it back.
Reggie Extra at Emory University this past weekend.
Turns out the Federal Reserve Bank of New York knows exactly how he feels. It's out with a new report that says -- once you add in however much Reggie owes -- this country's collective student loan bill is now $870 billion. That's more than our total credit card debt, and it's a burden not just on recent graduates.
Marketplace's Nancy Marshall-Genzer reports.
Nancy Marshall-Genzer: Today’s new college grads are so burdened with student loan debt, they’re putting off key life decisions. They’re moving back in with mom and dad, postponing buying that first new car or getting an apartment.
Jack Jennings is founder of the Center on Education Policy.
Jack Jennings: They won’t be buying furniture, they won’t be renting apartments or buying condos. So it’ll have a ripple effect throughout the entire economy.
The furniture store sells fewer futons; electronic stores don’t sell as many TVs. The ripples from student debt swelled to a tsunami when they hit the housing market. Toppling sales figures for first-time buyers.
Rick Palacios is a senior research analyst at John Burns Real Estate Consulting. He says in 2009, 50 percent of all existing home sales were to first-timers. Now, it’s about 30 percent -- and dropping. Palacios says that has a ripple effect of its own, on what he calls "move-up buyers."
Rick Palacios: A move-up buyer typically counts on a first-time home buyer for them to sell their home and purchase a bigger home, purchase a nicer home.
And even if new, debt-laden grads wants to buy a new home? They may not qualify for a loan. Mike Ryan is with American Student Assistance, a nonprofit that helps people manage student debt.
Mike Ryan: If somebody is past due for a long period of time or defaults on a loan obligation, it will certainly be a red flag for the bank.
The New York Fed says as many as 27 percent of student loan borrowers are delinquent.
In Washington, I’m Nancy Marshall-Genzer for Marketplace.
I assure you that if these loans were held to GAAP standards to which audited statements (and sometimes governments!) are held (or even common sense), almost all of these loans would be considered "uncollectible" and hence worthless. There is huge latitude given to servicers to reduce interest, forgive fees, and extend payments and maturities based upon the apparent ability of the debtor to pay. So the graduate (or flunk/drop out in a ballet, beautician or truck driving school who is un/underemloyed, can have past due interest "brought current by adding it to the principal balance which will never be repaid. That "official" 27% delinquency we heard tonight is the tip of the iceburg - or bottom of the barrel - depending on your vantage point. So think of it: the taxpayers have guaranteed more loans that will never be repaid than exist (according to the report) as total credit card debt! We are familiar with commentary regarding "shadow unemployment" vs BLS figures, and surely those supported by the student loan program should be added to the "underemployed," "given up," etc., in addition to an honest accounting for the bogus/uncollectible loan balances. Eh gads! Isn't this the story rather than the pablum we heard tonight? If public radio weren't so liberal, we could have heard some disturbing and useful facts tonight.
