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Entries in Student Debt (6)

Thursday
Sep272012

Student Loan Debt Weighing Down the Young and Poor

JupiterImages/Comstock Images(NEW YORK) -- Millions who've gone to college say they owe a lot to their education.

Unfortunately, millions still owe a lot for their education, with close to 20 percent of all U.S. households saddled with student loan debt as of 2010.

That's over double of what it was 20 years earlier, with most of the crushing burden of debt having fallen on the backs of those who are young, poor or both.

In 2010, the Pew Research Center computed that the average outstanding debt was nearly $26,700 and the total owed nationally as of earlier this year was $914 billion.

These mountains of IOUs are based predominantly on two factors: college tuition that easily outpaces the annual rate of inflation and federal government borrowing limits now exceeding $30,000, compared to a ceiling of $7,500 during the 1960s.

Since those on the top rung of the income scale send more people to college, they hold almost a third of the debt.

However, the poor owed a far greater share of what they earned since student debt eats up a quarter of the lower fifth's yearly income.

Meanwhile, heads of households under the age of 35 account for 40 percent of the student debt, a staggering jump from 17 percent in 1989.

Copyright 2012 ABC News Radio

Tuesday
May292012

Parents Delay Retiring to Pay Kids’ Student Loan Debts

JupiterImages/Comstock Images(NEW YORK) -- After years of hard work, saving up and an Air Force pension, Terry and Edward Fackler of Everett, Wash., thought they had retirement covered.

Then the student loan debt started piling up.  It wasn’t theirs, though, belonging instead to two of their three children.

Now, with their savings down to $20,000 from $80,000 -- and a student-loan debt of $116,000 that they’re still responsible for -- the couple say they’re not so sure that they’ll be retiring any time soon.

The Facklers are part of an often-hidden yet sizable number of retirement-age Americans drowning in an estimated $36 billion in student loan debt for themselves and their children.

“The whole concept that student loan debt is a 20- or 30-something problem is just misplaced,” said William Brewer, president of the National Association of Consumer Bankruptcy Attorneys.

The Facklers co-signed for loans to put their kids through college and now their children can’t afford the debt payments.

Despite having three college diplomas -- a bachelor’s and two master’s -- their son Mark, a veteran, is barely able to pay the $600 monthly, interest only, payments on his loans.  He now owes close to a quarter-million dollars.

“I am 40,” he said.  “They are 73-plus and my mom is a little younger.  I don’t want to be a burden on them.  I think about it all the time.”

Edward, 73, is a church minister and Terry, 65, is a retired preschool teacher.  Her Social Security checks, in addition to the couple’s life savings, now go straight to their daughter’s nursing school.  They said they were trying to spare Susan, 37, from the kind of loans burdening Mark, who lives in Texas.

Their other son, Brian, 35, is serving in Afghanistan and has no loans.

Financial planners advise parents to co-sign only for loans if they are prepared to pay the debt themselves.  They also say that if a person is considering returning to school for a second career, financial consequences should be considered because student-loan debt cannot be discharged in bankruptcy court.

“It’s like a ball and chain that you perhaps drag to your grave,” Brewer said.

Copyright 2012 ABC News Radio

Thursday
May242012

Man Pays Off $114K Student Loan Debt in Cash

Alex Kenjeev(LONDON) -- When Toronto resident Alex Kenjeev realized he was finally in a position to pay off more than $114,000 in student loans, he wanted to make it memorable. He did so by paying his debt all at once—in cash.

His feat went viral when he posted a photo of the receipt for $114,460 (US $111,350) on his Facebook page.

"I thought it would be funny, mind you, not for the world, just for me," he told ABC News. "I didn't expect it to go viral at all."

Kenjeev is the president of O'Leary Ventures, a company that invests in and supports start-ups. The company is owned by Kevin O'Leary, an entrepreneur who appears on ABC's Shark Tank. On the show, business hopefuls pitch their ideas to a panel of successful entrepreneurs, or "sharks," who decide if they will invest in them.

The debt was for Kenjeev's undergraduate degree from McGill University along with debts from law school and an MBA from the University of Toronto.

After finishing school, Kenjeev said he wasn't paying his debt "aggressively." Instead, he was putting most of his money into a software start-up. When he recently sold the "very profitable" start-up, he had enough money to pay the loan in one fell swoop.

He went to his local Royal Bank of Canada and asked to withdraw $114,460. The bank that held the loans was different than where he keeps his money.

"Their initial reaction was they didn't want to do it," he said. "Then they said, 'We can't give you this much.' And I said, 'What do you mean? I deposit my money here with the expectation that I can take it out. Is this not what banks have been doing for hundreds of years?'"

The bank told Kenjeev he would have to pay the transport fees to have the money delivered by armored truck. He asked them to make sure of that and went home.

The next day, he received an email from the bank saying that they could give him the money. He went back and they took him into a small window-less back room where they counted out the money.

"I put it into a grocery bag and walked a couple blocks to the other bank," he said. "I tried to play it cool."

He told the Scotiabank branch that he wanted to make a deposit in the account with a balance of negative $114,460.

When the teller asked how much he wanted to deposit, he said, "'Oh, the same amount that you see there. Here you go.' And I sort of plopped it down on the counter. She didn't want to accept it initially."

After more than an hour, the bank accepted the money and Kenjeev sauntered out debt-free.

"When I walked out of the bank, I was feeling pretty happy," he said. "I spontaneously snapped a photo of the receipt and posted it to my Facebook wall."

People on Facebook began commenting on the image, some congratulating him and others criticizing him for bragging. Someone put the photo on Reddit and it garnered thousands of comments, many of which were critical. Kenjeev said he had no intention of rubbing anything into people's faces.

"I really wasn't thinking about that, to be fair," he said. "It was a milestone moment in your life, when you become debt-free, and not everyone had a receipt, but I did because of the way I did it."

Kenjeev has been keeping busy preparing for O'Leary Ventures to launch their own wine and mortgage companies later this year, but has also been enjoying life as a debt-free man.

"It feels good," he said. "It feels like a weight has been lifted."

In the U.S., some $1 trillion in student loan debt is outstanding.

Copyright 2012 ABC News Radio

Wednesday
Apr182012

Student Loan Debt Continues to Soar

JupiterImages/Comstock Images(NEW YORK) -- Two out of three college students graduating this spring will have student loan debt, with the average loan amounting to nearly $25,000.  And as costs continue to rise, the amount owed is piling up, causing many borrowers to fall behind on their payments.

Almost every year, college tuition costs go up faster than inflation, making the bills tough to pay.

As Gerri Detweiler of Credit.com notes, "Student loan debt is becoming a huge problem for so many Americans students and their parents."

She says student loan debt is approaching $1 trillion.

"It's larger than auto loans and it's larger than credit card debt," Detweiler explains.

And it can be hard to pay off.

"We have over five million Americans who are behind on payments on their student loans," she says.

Detweiler's advice to students?  Take out federal student loans not private ones.

Copyright 2012 ABC News Radio

Thursday
Oct272011

How Can You Scale Back Student Loan Payments?

JupiterImages/Comstock Images(NEW YORK) -- President Obama announced his plan to help borrowers inundated with student loan debt on Wednesday, which coincided with the release of a new report from the College Board that showed how higher education had become even more expensive.

The College Board found that the average in-state tuition and fees at four-year public colleges rose 8.3 percent this year.  Tuition rose more than 4 percent at private colleges -- all at a time when student borrowers and college grads struggle to keep up with payments in a weak economy that holds even weaker job prospects.

The president's plan includes capping federal loan payments at 10 percent of borrowers' discretionary income -- that limit is set at 15 percent now -- making loans forgivable after 20 years instead of 25, and provides the opportunity to reduce some federal loan interest payments.

If you're one of the 36 million saddled with student loans across the country, you could use some tips on how to lower your payments. Here are some tips from several industry watchdogs, including Lauren Ascher, president of the Institute for College Access and Success and its project on student debt:

1. Know Your Loan: There is a huge difference between federal and private student loans.  Federal loans, according to Ascher, offer a lot of options for staying out of default and keeping payments manageable, while private loans can leave borrowers at the mercy of their lenders.

2. Know Your Grace Period: All loans have varying grace periods.  It's six months for federal Stafford and federal Family Education loans, and nine months for federal Perkins loans, depending on when they were issued, according to the Project on Student Debt.

3. Tax Deduction: All borrowers should take advantage of the student loan interest tax deduction, an above-the-line exclusion on a federal tax return of up to $2,500 in student loan interest.  You can claim the deduction even if you don't itemize your taxes.

4. Take Advantage of Automated Payments: Many lenders offer a small reduction in interest rates if borrowers sign up for automatic monthly payments.

5. Consolidation: Consolidating is similar to refinancing a loan, and allows borrowers to combine several (or one) loan into one payment -- the interest rate is an average of the interest rates on all the loans.  Consolidating will usually lower the monthly payment but isn't always a great idea, as it often extends the life of the loan and can result in more interest paid throughout its life.

6. Extended Repayment: Government loans allow some borrowers to extend the repayment period of their loans beyond 10 years, which can lower monthly payments.  The down side?  Extending your repayment terms can lead to paying much more interest over the years.

7. Income-Based Repayment: The Income-Based Repayment plan caps borrowers' monthly payments at 15 percent of their discretionary income, taking into account the borrower's income and family size.  Monthly payments are adjusted annually according to any changes in those figures.  The government then forgives any outstanding debt on the plan after 25 years.

8. Deferment: "There's an unemployment deferment for federal student loans, there's economic deferment and forbearances.  These are all useful for short-term debt management.  But on some loans, your interest will continue to accrue," Ascher said. Deferring on your loans means you can postpone making payments, but you are eligible only if you haven't defaulted.  Deferment is not an option with private loans.

9. Forbearance: There are positives and negatives to this option.  The positive?  You can temporarily postpone your loan payments.  The negative?  Interest on that loan will continue to accrue.  On federal loans, the option is available for 12-month intervals for a period up to three years.  Private lenders generally only offer it for one year, and they can charge fees, like popular lender Sallie Mae, in some cases.

Copyright 2011 ABC News Radio

Thursday
Oct212010

Unemployed Law School Student Pens Letter to Dean Asking for His Tuition Money Back

Photo Courtesy - Getty Images(BOSTON) -- A Boston College law student unhappy with his job prospects has made the university an offer: return his money and he'll forfeit his degree.

The proposition was made in an open letter written anonymously by the student, who's identified only as a third-year law school student. The letter was posted last week on the law school's independent student-run website, Eagleionline.

The letter, addressed to the school's Interim Dean George Brown, explains how the student is unable to support his wife and the baby they're expecting and is in "an enormous amount of debt" from his time at Boston College.

"With fatherhood impending, I go to bed every night terrified of the thought of trying to provide for my child AND paying off my J.D., and resentful at the thought that I was convinced to go to law school by empty promises of a fulfilling and remunerative career," the student, who says he's set to graduate in 2011, writes.

In the letter, the student criticizes the university's career services department, saying he and his peers have received "little help" to cope with their "financial disasters."

One year at Boston College Law School, including tuition and housing, costs about $60,000, according to the school's website.

"I'd like to propose a solution to this problem:  I am willing to leave law school, without a degree, at the end of this semester," writes the student.  "In return, I would like a full refund of the tuition I've paid over the last two and a half years."

Repeated requests by ABC News to interview the student were declined.  Brown was also not made available for an interview, but a spokesman for the law school issued a written statement.

"As a Jesuit law school, we are deeply concerned about the job prospects and general well-being of our students and our recent graduates," said Nate Kenyon, the director of communications at Boston College.  "The job market in the legal profession and beyond has been severely affected by the current economic downturn, which has resulted in one of the most difficult employment climates in the past 70 years, not only for BC Law, but for all schools across the nation."

Kenyon also added "no institution of higher education can make a guarantee of a job after graduation."  Kenyon further disputes the student's claim that the school's career services are inadequate, writing in the statement the office is committed to working with each student "for as long as necessary to help them find employment."

It is not yet known whether the university is willing to compromise with the student on any of his requests, but in a section on the school's website addressing tuition refunds, the policy reads, "No tuition will be refunded after the fifth week of classes."

Copyright 2010 ABC News Radio







ABC News Radio