There’s probably a joke in here somewhere. You know you’re an American when you’re still paying off your student loan after you’ve started collecting social security…
I know, I know…not everyone receiving social security is older.
Is it just me, or are student loan delinquencies going to be a problem? A widespread problem.
Daddy’s home, tough love time.
iirc, student loans were “reformed” some years ago, so that they cannot be discharged in personal bankruptcy, unless the former student can prove there is no possible way they can pay the debt in their lifetime.
Steve
Yeah, in November 2022, the process was simplified and streamlined. In addition to a bankruptcy hearing, debtors need an adversary proceeding to determine undue hardship.
https://studentaid.gov/manage-loans/forgiveness-cancellation/bankruptcy
How Courts Determine Undue Hardship
The bankruptcy courts do not use a single test to determine undue hardship but may look at the following factors to determine whether requiring you to repay your loans would cause an undue hardship:
If you’re forced to repay the loan, you would not be able to maintain a minimal standard of living.
There is evidence that this hardship will continue for a significant portion of the loan repayment period.
You made good faith efforts to repay the loan before filing bankruptcy.
Also, the Department of Education has given employees a Double Knee Facebreaker and Figure Four Leg Locked the department that handles student loan forgiveness and repayment programs.
It’s much shorter.
You know you’re an American when you need a student loan.
A lot of countries make college affordable for qualified citizens (and sometimes non-citizens)
https://www.mygermanuniversity.com/articles/tuition-free-universities-in-germany-taught-in-english
I wonder if this is still true now that the US is a pariah state?
intercst
And not everyone going to school (with a loan) is young. Second career choices sometimes involve going back to school.
DB2
Great point Bob.
I suppose the good news is that student loan delinquencies are not yet at 2013-2020 levels.
Seems like there’s a potential for a perfect consumer debt storm with significant exposure in mortgages, HELOCs, credit cards, and now student loans.
I think it all depends on whether or not there is a recession and how deep it is.
Mortgage debt is at its peak right now, however the vast majority of it is at very low interest rates. So it is probably the last debt that will be defaulted on. HELOCs are tiny now, I think they are at the same nominal level as in 2003. Credit card debt is the one that usually gets defaulted on first - highest rates and there is always the option to use cash when they are cancelled. Student loans are a whole different animal - with all the talk over the last few years of “forgiving” them, many people may decide to default on them and just wait for an amenable political climate in which they will be forgiven, or at least partially forgiven.
My back to school was a very low cost accounting extension course by mail. Sr. Tulio Hansen, my boss at NCR, asked me if I knew accounting. “No.” “How do you expect to sell accounting machines if you don’t know accounting?” I’m most grateful to Sr. Hansen!
The Captain
Dear E,
Hopefully we get rid of minimum wage in those deep blackish red states. We do not want anyone to escape with bills paid.
I think they will be in for a surprise. In most cases in the last admin (with exceptions for things like total and permanent disability) forgiveness required a long history of on-time payments, up to 25 years in some cases.
If you default without some major life event like permanent disability, you almost certainly got yourself taken off the forgiveness list.
I medium agree, economic conditions will either strengthen or weaken the storm…but a storm is a comin’. Too many in the US are living paycheck to paycheck. People are maxed out. Even a small disruption in their finances can create a domino effect that eventually impacts whole sectors of the economy.
They recently announced that they will start clawing back money from student loan defaulters. It doesn’t appear there will be a “let’s wait and see” option for many.
It would be an understatement to say that a lot of the current policies and shenanigans are working against each other. Deficit bad, cut taxes…law and order good, pardon felons…corruption bad, give me a free jet…and on, and on, and on. So, when they say they want people to pay back their student loans, then they cut the minimum wage, it shouldn’t be a surprise.
Speaking of surprises…I agree. Unfortunately it won’t be a good kind of surprise. I’m a “see the good in others” type of guy. I believe most want to pay back their student loans. Many are in a tough spot.
I certainly don’t want to imply that people shouldn’t pay back what they borrowed, just acknowledging that for many, it will not be possible. This will certainly have serious macro impacts.
Looking for origins of student loan delinquencies…
Members of the class of 2025 say they expect to earn an average $101,500 per year for their first job, according to the survey of over 3,000 recent and rising college grads between Feb. 28 and March 19.
That’s much higher than what the average recent grad actually makes — $68,400 per year — according to survey data.
[A 50% overestimate. High school counselors should post these numbers in large letters.]
DB2
