Student Loan Debt Not Threat To Banks

But here’s the thing — everyone knew that more student loans were available without any financial obligation visite site to the state or UMass. So they passed the buck to the feds, who passed it on to students in the form of loans. In this case, it’s clear to see that the ample availability of student loans did influence the hike in tuition. A recent study compares the tuition of private universities in five states. They found that the schools where students have access to federal loans and grants are charging 78 percent higher tuition than the ones where students are not eligible for federal loans and aid.
Source: http://www.huffingtonpost.com/bob-hildreth/student-loans-tuition-increase_b_4809036.html

Whats more,The New York Fed found that 11.5% of student loans are 90 days past due or in default. A massive debt burden topping one trillion dollars possess crippling risks for the individual graduate but also, unaddressed, carries large consequences for the economy as well, Piegza said. The consequences not only include weaker home sales, but less spending on all kinds of consumer goods and services. Slack demand, in turn, gives businesses less reason to hire and create more jobs. And if graduates are unable to find a well-paying job, the burden of paying back the debt grows even more onerous.
Source: http://blogs.marketwatch.com/capitolreport/2014/02/18/rising-student-loan-debt-is-stopping-first-time-home-buyers/

(Paul Buckowski / Times Union) Antwuan Sims of Albany talks to members of the media about his… Page 1 of 1 Schenectady Legislation that would give people facing heavy debts from student loans a chance to refinance at a lower rate is being pushed by U.S. Sen. Kirsten Gillibrand . The Federal Student Loan Refinancing Act would enable those with interest rates on their debt above 4 percent to refinance at a fixed rate of 4 percent, lowering monthly payments. The move comes at a time when student loan debt has ballooned to $1.08 trillion, up $114 billion from a year earlier, according to the Federal Reserve Bank of New York .
Source: http://www.timesunion.com/business/article/Gillibrand-End-heavy-student-loan-burden-5246333.php

Many people, she said, are trying to draw comparisons to the housing crisis that helped trigger the Great Recession, but banks dont have the same exposure to the student loan market. Financial institutions providing capital for student loans only accounted for 7 percent of the total market in 2010-11, the most recent year data are available. The other 93 percent was provided by the federal government through its student loan programs. So, while taxpayers bear risk even though student loan programs now are operating in the black an avalanche of defaults would not pose as much risk to bank balance sheets, which is important because it lowers the likelihood of another taxpayer-funded bailout for banks. Still, the mushrooming student debt load will have implications for the nations economic health. From the Feds perspective, the concerns about economic growth are a bigger issue, Ms.
Source: http://www.toledoblade.com/Economy/2014/02/19/Student-loan-debt-not-threat-to-banks.html

That orange line is student debt. It is going in the opposite direction of all of the other lines. But arent people facing poor job prospects just taking out more loans to avoid working as baristas at coffee shops that drip the coffee super slowly for no apparent reason? This does not appear to be the case from the debt data. Student loan debt has grown at almost exactly the same rate since the crash as it had been the previous five years i.e.
Source: http://www.forbes.com/sites/joshfreedman/2014/02/11/student-loans-are-a-big-drag-on-the-economy-and-society/

They’re told they need a college education to get a good job, but many can’t get jobs if or when they graduate. Now critics question the wisdom of pushing loans on students who can’t pay them back. Argelia Rodriguez runs a financial aid program for low income students. She says sadly some students are the victims of broken promises. At that point, students have a choice of taking out loans or dropping out. Others say loans might not be a problem if students have a way to pay them back.
Source: http://www.cbs12.com/news/top-stories/stories/vid_13334.shtml

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