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Occupy Wall Street protesters irked by rising student debt in U.S.

Demonstrators with the Occupy Wall Street movement attempt to cross the Brooklyn Bridge on the motorway on Oct. 1, 2011 in New York City.

Steve Chiotakis: Protests over the inequity between Wall Street and the rest of us continue. Some of the cardboard signs held up during weekend protests in New York read: "Honk if you have student debt." The protests have also fueled an online petition that proposes to forgive all student loan debt to boost the economy.

Marketplace's Gregory Warner is with us live to talk about what the protesters are so upset about. Good morning, Gregory.

Gregory Warner: Good morning.

Chiotakis: Why has student loan debt become this cry of protestors -- is it just because they're mostly young people here?

Warner: That's part of it, sure, but student loan debt in this country is now $830 billion. That's higher than credit card debt, and of course there are more credit card holders than students -- so that's a huge debt burden. And students are taking on more of the riskiest kind of debt -- these unregulated private student loans -- where you have the least protection and pay the highest interest rates, up to 19 percent.

So the argument you hear is, "You've bailed out Wall Street, what about us?" Forgive student loans, you boost the economy because you put hundreds of dollars a month back in the pocket of middle-class families, and of young people just as they're entering the workforce.

Chiotakis: What does this have to do with Wall Street?

Warner: Just as Wall Street helped spur the housing bubble with mortgage-backed securities, they've also spurred the student loan bubble with, as they're called, student loan asset-backed securities.

So, that Wall Street capital has encouraged really aggressive marketing by high-interest private loans to students, and now, student loan defaults jumped 26 percent last year. And just as foreclosed homes drag the economy and limit people's choices, so do private student loans -- which I learned you can't even get rid of by declaring bankruptcy.

Chiotakis: Marketplace's Gregory Warner, reporting for us this morning. Gregory, thanks.

Warner: Thanks.

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Cheryl P, I have to correct your assumptions ... I am a 53 yr old IT professional, employed FT, who has so far repaid $48,000 on a $20,000 student loan, and still owes $90,000 on that loan, due to the "fees and fines" and 28% interest rate of the Van Ru Corporation, whom my loan was sold to by the Federal Govt when I was out of work for 3 yrs in 1999-2001. My wages are garnished at a rate of $500 a month, and my total debt never decreases. This has been true for the 9 yrs since my wages were garnished. In order to stop wage garnishment and get out of default, Van Ru Corporation has told me, my Senator and my Congressman, who tried to help me reach a settlement agreement, to no avail, that I would have to pay an additional $900 a month, out of my $2200 a month take home pay, for a year, in order to remove my now $90,000 debt from collections and owe it instead to the Federal Govt.
I have always been willing to repay the Govt for my loan, but I will never see my now $90,000 in debt reduce, even when I someday can't work anymore, as Van Ru Corporation (a for profit private corporation) has the right to garnish my Social Security as well.
My only poor financial choice was to live in an area where there were NO jobs in 1999. As soon as I could, I moved away from there and got a good FT job, and have been responsible and paid every other bill on time. Re think your assumption, Cheryl. I will never qualify to own a home, and I will never even make a dent in this debt, and those are not fair consequences on a $20,000 debt which I have more than repaid.

Excellent commentary and it illustrates the complexity of the problem and the need for comprehensive student lending reform. This is not just about a few deadbeat kids taking out loans to study basketweaving and then not wanting to pay them back! Millions of decent, working or want to be working Americans who want to pay back what they borrowed are caught in this debt that mushrooms out of control and stays with you for life if you should ever fall behind in payments. And god forbid if you should ever have a medical catastrophe, unexpected job loss, death or business failure because there is no bankruptcy. Student loan payments have become insurmountable debt to hundreds of thousands of people, for various reasons that have a whole lot to do with how the government in cahoots with banking industry structured them . Their powers of collection make the mafia look docile! For people having any kind of financial difficulty, all of the interest, penalties and fees are capitalized and compounded daily and then multiplied by a collection agency who is allowed to add 25% on top of your total balance. These collection agencies are subsidiaries of the lenders themselves, like Sallie Mae! Try as you might, no one will work with you to restructure your payments. Deceptive practices allow them to take huge payments to rehabilitate your loan without applying any of it toward principle. No settlement or compromise. Why would they - they can garnish your wages and take your tax refunds and any other federal payment including social security. We have a lot to do to reform the student loan industry including, yes, maybe not lending out so much in the first place which would force higher ed to reign in school prices, and lowering student loan interest rates (why should the government be running a for profit banking enterprise?) but in the meantime - as a shot in the arm to stimulate the economy right into where we need it- into working class pocketbooks- FORGIVE STUDENT LOAN DEBT IMMEDIATELY!

I'm glad that Cheryl has such a cut and dried answer for everything. Cheryl, what about students who come from a rural area which makes it impossible to live at home while attending college and working your way through? Or just plain do not have community colleges available to attend without having to dump a bunch of (borrowed) money on room am board? This certainly isn't the norm but how about looking at the whole picture without making snap judgements. Just because this might be the way it is for you, doesn't mean it applies to everyone. -someone who is gladly paying back student loans but wouldn't have taken them if I had a college within 200 miles of my childhood home.

As a retired/former Educator I can attest to the abusive lending practices and the collusion by college admissions departments with the lenders that have duped the students and utilized loopholes in the law to lend irresponsibly. Also, Consumer protection has been stripped from student loans for decades now, because the Bought Congress graciously bestowed loopholes in the law onto their banker buddies. Americans need to reallize just how deep the corruption has gone. The reason it was so difficult to detect it is layered in so much complexity that there are only few lawyers inn the country who even attempt to take on cases of student lending abuses, and banking fraud in general. Fortunately, the facts are emerging, the youth are not taking it anymore. I urge parents who have sat back and let our Congress and lenders dupe you and your children start to take some time to learn the empirical FACTS. Football can wait. Your children need your support. Adults that have been apathetic and let the do-nothing Congress do nothing but pass dysfunctional legislation -- need to take a stand or your children and their grandchildren will be indentured slaves, in debt forever. And adults shouldn't be exculpating responsibility. While a generation of adults ate popcorn and watched TV, our government duped us all. No one wants a free ride... they just want justice and responsible legislation. Looks like the youth and other multigenerational fighting Americans will have to take back the justice if the rest of you don't stand up and join them. Justice for All, not just the 1%. And Congress.. well they need to serve us, not their special interests.

You know what . . . if one really wants to dumb this down to black and white concepts that anyone can understand it is simply this: None of us should have been approved for student loans, regardless of a credit-worthy cosigner, PERIOD. Let's pretend for a moment we are a legitimate bank lending out money to a potential student: Underwriter experts say that your monthly student loan payment should not exceed 15% of your gross monthly income. Using that model if one borrows $48,000 for a college education at an average rate of 6.8% and with a repayment term of 10 years; the monthly payment for this loan would be $552 a month meaning said individual would need to be making a yearly salary of $44,160 upon graduation. If you borrowed $60k you would need to be making $55,200 a year and if you borrowed $100k you would need to be making $92,000 a year. Guess what banks, 95% or more of college students upon graduation WILL NOT BE MAKING THOSE KIND OF SALARIES OUT OF THE GATE! This is NOT ROCKET SCIENCE IT IS PLAIN STUPID MATH!!! You idiot banks had NO BUSINESS approving these student loans and deserve everything that comes to you for your out right stupidity, ignorance and greed. You all should be sued for fraud and poor business practices and for allowing this mess to happen in the first place.

Degrees are inflated...and the high interest rates on those student loans were SUPPOSED to make those loans more of a burden, so it would self-limit to those who would actually be able to pay for them. But all those people took those loans anyway...because now EVERYONE has to have a degree in SOMETHING because SOMEONE said so (just like the glut of lawyers that we didn't really need...now we have litigation out the wazoo due to all the ambulance chasing by lawyers who couldn't find real law jobs)...so you have thousands upon thousands who have darned near WORTHLESS "liberal arts" degrees...and they are mad that they took a high-interest loan to get it...and mad they have to pay that loan off...and they want to punish everyone except those who created the system that said they just HAD to have that worthless degree in the first place...you people got PLAYED and it wasn't by the lenders...me, I'm getting a certification...I'm going to be a technician...things don't fix themselves...and the field I'm going into, a certification will net you a job LONG before a degree will...so I won't get rich...but I will get PAID!

maureen f wrote "i would add that private (non-federal) student loan debt is even more virulent in that even if you DIE it is passed to your next of kin..so that your parents and/or spouse are saddled with the debt in the event of your demise..."
This is not true unless
- You were a co-signer on the loan in question (i.e. parent and/or grandparent co-signed for the loan)
-You live in a "community property state" and a spouse passes away with debit.

Other than that the estate of the deceased would/could be liquidated. The money would then be used to pay back any debtors. Nevertheless, some creditors may make an attempt to collect the remainder from you, but they have no legal grounds for collecting, though they can certainly ask.

Yeah, I don't know. I understand the predatory behavior behind loans of all kinds and it's unfortunate students got wrapped up in this, but... If you couldn't afford to go to university full-time, four years in a row without getting a loan, then you shouldn't have. Part-time student is an option; in-state school is an option; two-year school is an option. No one "has" to graduate undergrad in four years. It's not essential to finding a job or making money.

Now, I say this as someone who did take out loans so that I could go to school full-time and graduate in four years. (I also worked, FWIW.) My family could contribute zero dollars to my education and I knew I'd be slammed with paying back four years of an out-of-state private university when I graduated. And yeah, I didn't get some big deal job when I graduated. I worked in restaurants and delis and group homes. And it sucked giving that dough up every month. But in the end it was my decision to complete school the way I did and I got a degree that, throughout my life, will help me earn more money than had I not.

So, I get what students are saying today - it may be a more devious system then it was a few years ago - but every year youth with students loans moan about having to pay them back. It's not new, and I'm not sure it's relevant to today’s economic issues.

I am not totally unsympathetic ... but forgiving student debts with no negative consequences sends a very bad message to everyone, and is an insult to those who broke their butts to actually pay off their debt.

@Art- Sure the cost has gone up due to increased demand, but you need to understand what drives all that new demand. Just like the housing bubble, artificially cheap credit made possible by government guarantees creates enormous inflation in prices. The cost of education should be falling with the advent of technology, but just like anything else with heavy government subsidy, prices have gone to the moon. The government will insure a student loan for ANY field of study no matter how impractical. When they finish, the only job they are qualified for is working for the state or federal government.

@Drone: We have way to many people in college studying nonesense that will never be able to pay back the debt incurred. It's become a defacto way of supporting oneself: take student loans, pay rent and buy food, and go to school for a while. Without all these extra college students, the unemployment rate would have been much higher now since students aren't counted as unemployed, even if they went to school on loans because they couldn't find a job.

We have people today doing jobs that previously had been performed by people that had learned on the job and had started working 4 years sooner in their lives. Employers hire kids with degrees over those that don't have them not necessarily because of what they learned in school, but just as a way of preselecting for smarter/motivated kids. These are many of the same kids they would have hired in a different time without a degree.

The only way I'd support some type of forgiveness of student loans would be if from that point going forward, the government got out of the business of insuring student loans. Without that, the moral hazard is just to high.

These sky high tuitions are great for the educational beurocracy, but it's really unfair to saddle our young people with the equivelent of a mortgage and no house to show for it.

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