The Five Things You Might Not Know About Student-Loan Debt

Eco­nom­ists at the Fed­er­al Re­serve Bank of New York just re­leased some new re­search based on Equifax cred­it-re­port data on re­pay­ment rates of stu­dent loans. Here are a few things they found:
1. Most people aren’t pay­ing off their stu­dent loans.
At the end of 2014, only 37 per­cent of all 43.3 mil­lion bor­row­ers na­tion­wide were mak­ing pay­ments on time and re­du­cing their loan bal­ances.
About one-third of bor­row­ers had grow­ing debt, likely be­cause they were tak­ing out more loans to pay for more edu­ca­tion. Some bor­row­ers were en­rolled in pro­grams that al­lowed them to de­fer re­pay­ing their loans, and 17 per­cent of bor­row­ers had fallen be­hind on their pay­ments.
2. This isn’t just a young per­son’s prob­lem.
Two-thirds of the na­tion’s stu­dent-loan debt is held by people over age 30. The eco­nom­ists found that 30- and 40-somethings have the highest loan bal­ances of all bor­row­ers–an av­er­age of about $31,000, com­pared with the over­all av­er­age of $26,000.
And when the eco­nom­ists stud­ied groups of stu­dents who star­ted re­pay­ing their loans in 2005, 2007, and 2009, they found that in all three co­horts, 30-somethings ex­per­i­enced the highest rates of de­lin­quency and de­fault.
3. Stu­dent-loan debt is in­creas­ingly an prob­lem for seni­or cit­izens.
People over age 60 now hold about $43 bil­lion in stu­dent loans, and that total is rising fast. Over the past dec­ade, the amount of debt held by seni­ors shot up 850 per­cent. A Gov­ern­ment Ac­count­ab­il­ity Of­fice re­port–which I wrote about last year–found that most of the debt held by the eld­erly was for stu­dent loans that fin­anced their own edu­ca­tions.
4. Mak­ing pay­ments is easi­er if you’re rich.
People from low-in­come areas have much more trouble pay­ing off their loans than people who hail from high-in­come areas. The Fed’s eco­nom­ists didn’t know how well-off the bor­row­ers in their data set were, so they looked at a proxy: the av­er­age in­come earned by res­id­ents of the zip code that bor­row­ers lived in when they took out their first loans.

The eco­nom­ists found par­tic­u­larly stark dif­fer­ences for the group that entered re­pay­ment in 2009, dur­ing the depths of the Great Re­ces­sion. In the ag­greg­ate, bor­row­ers from neigh­bor­hoods where in­comes av­er­age less than $40,000 a year have paid down just 3 per­cent of their debt. Nearly 60 per­cent have either fallen be­hind on pay­ments or de­faul­ted on their loans.
Mean­while, people from neigh­bor­hoods where in­comes av­er­age $80,000 or more have paid off nearly 30 per­cent of their total debt. Only 20 per­cent of those bor­row­ers have had trouble mak­ing pay­ments.
5. Bor­rowed a lot of money? That doesn’t mean you’re likely to de­fault.
In a pre­vi­ous study, eco­nom­ists at the bank found that bor­row­ers from the 2009 co­hort who held the smal­lest amounts of debt–between $1,000 and $5,000–were ac­tu­ally the most likely to de­fault on their loans.
People who star­ted re­pay­ing $100,000 or more in study loan in 2009 were the least likely to de­fault–but they were also highly likely to enter 2014 with ad­di­tion­al debt. To the eco­nom­ists, that sug­gests that many of those people are either de­fer­ring pay­ments or mak­ing pay­ments so small that they’re not even cov­er­ing the in­terest on their debt.
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About the Author(Article Source:
I am Rahul Singh working with bank as Loan & Fixed Deposit Adviser owing good knowledge of Educational Loan, Student Loan, Educational Loan in India Study Loan Educational Loan for MBA.


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