A couple of Student Loan topics this week,
Bloomberg News does a nice job showing
the Student Loan crisis is worse than what
the government is telling us.
Student Loan Crisis – Defaults
For most contracts, default means you missed a payment, or, let your car insurance lapse.
But in Student Loan Land:
The default figure understates the true amount of distress. The Education Department counts a borrower as being in default only once she has gone 361 days without a payment, and the Obama administration doesn’t make public the number of borrowers who are defaulting on federal student loans made by other lenders in a since-discontinued bank-based program.
As I keep saying, the government counts loans in forbearance as current.
Not to mention, student loans on which payments are being made will take much longer to be paid off.
More than half the debt carried by borrowers is scheduled to be repaid more than a decade after the bills first came due—a reversal from four years ago, when most debt was scheduled to be repaid within 10 years.
This is largely due to greater enrollment in income-based repayment plans, which stretch out payments to 20 or 25 years. As a result, Americans are now carrying substantial amounts of student debt well into their 40s and 50s, according to the Federal Reserve Bank of New York.
And, guess what? The government is not meeting its goal of no defaults. Defaults are rising, 1.1 million new defaults on student loans last year.
And the government, warning that the future may bring what has already happened:
Federal financial regulators and the U.S. Treasury Department have warned that high student debt burdens could dampen household consumption and reduce Americans’ ability to take out new loans to purchase or invest in other items. In 2013, President Barack Obama himself issued an ominous warning. “Our economy can’t afford the trillion dollars in outstanding student loan debt, much of which may not get repaid because students don’t have the capacity to pay it,” he said.
For what to do if you have student loans for attending ITT, see my friend Joshua Cohen’s advice.
National Collegiate Trust
This is the company that does nothing but buy private student loan debt.
It has some 24 different trusts to which it spins off the student loans it allegedly buys.
I say “allegedly” because I have yet to see them prove they have actually purchased a loan on which they were suing my client.
Each trust is a separate entity, and, files suit on the loan it supposedly owns.
I now have one client with 14 different lawsuits against her, all in the same court, because different trusts are suing her.
We shall see if NCT breaks precedent by proving it actually owns the private student loan on which it is suing.