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Is student loan debt the next housing crisis?

As more and more debt piles on, many make comparisons between this bubble and the one that burst a few years back: housing. But are they really that similar?

As we look back at five years since the financial and housing crisis began, we see another possible bubble forming: student loans. But can the two really be compared?

"Those are two different stories that are going to end in two different ways," says Betsy Mayotte, director of regulatory compliance at the nonprofit American Student Assistance.

The biggest difference, Mayotte says, is that in the case of the mortgage crisis, there was a physical asset to walk away from -- or for the bank to foreclose on.

"Unless the NSA has invented some other program that I'm not aware of, there really isn't a way to repossess a diploma," Mayotte jokes. On the plus side though, there are a lot more options available to those who are struggling to pay off their student loan debt -- including the Public Service Loan Forgiveness Program and income-based repayment.

 

Those options might be hard to see when you feel like you are drowning in debt -- or even just plain old misinformed. "Just remember, it's very common for student loans to change loan holders, regardless if it is a federal or private loan," she says. The best way to check? If it is a federal loan, you can find out by doing a quick search on the National Student Loan Data System. Have a private loan? Check your credit report. If you still have questions and don't seem to be getting answers, keep pushing.

"If you walk away with one thing from this story," Mayotte says, "I hope you remember this: always call. I see a lot of people that assume that nothing can be done for their situation so they sort of bury their head in the sand. And there's almost always something that can be done to relieve someone's situation if they can't afford their debt."

About the author

Lizzie O'Leary is the new host of Marketplace Weekend.
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The point to keep in mind, is the fact that students in this country graduate with huge debt, while in most European countires students get either a free or affordable college education. Why is that? Could it be that we use alot of money and resources for other no-prouductive activities like wars? It seems whenever a military conflict develops around the world, it is always the good old US of A that is burdened with most of the costs, in human lives and other resources. Americans need to start paying attention to how our tax money is spent, and start demanding that the priorities start shifting.

Think about how difficult it is for a college grad to start their professional life under the weight of huge student loan debt. And with the job market the way it is, not being able to find gainful employment in their field, the problem becomes un-manageable. Then their credit scores get ruined so even if they do eventually get a decent paying job, they have to work for several years before they can build up a good credit score. The loan holders, whether it is the federal government or private lending companies can virtually destroy a young person's credit, and put them way behind the eight ball.

Education in the US is failing from when kids first enter, to when they finish college , and it is time the American people stand up and voice concern. It is time we start acting like the country we can be.

The main difference from Student Loan Debt Crisis and the Mortgage Crisis is who holds the debt. When banks and other financial institutions held bad mortgages, they just about went broke thus the crisis. Since most of the student loan debt is held by the federal government, the debt is held by the same group that can just print money. Having said that, the real issue is be how much federal debt will the market for our bonds except before demanding higher interest due to risk.

mainstreet, i find it revolting that you're looking at the crisis from the perspective of the debt holders, and ignoring the debtors. The mortgage crisis was a crisis on both ends. People becoming homeless, and banksters losing their giant end-of-year bonuses. If you actually read the article, you'd note that the author was positing that students being saddled with huge amounts of non-dischargeable debt could be a massive problem very soon. Non-dischargeable. So the fed government doesn't actually need your worry.

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