AuthorTopic: 🎓 Subprime Student Loans  (Read 22312 times)

Offline RE

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How I ditched massive student loan debt: ‘I just pretended I didn’t have money’
In this series, NerdWallet interviews people who have triumphed over debt. Responses have been edited for length and clarity.
Bev O'Shea | NerdWallet | 15 hours ago

Sarah McGowan

Bernie Sanders and Elizabeth Warren are already vowing to do something about student loan debt. This is why the 1.6 trillion dollar issue could play a big part in the 2020 election.
Just the FAQs, USA TODAY[/i]

When Sarah McGowan was 23, she already had a master’s degree and was working in her first career job as a speech pathologist. She also lived with four roommates, drove an old car, took every babysitting opportunity she could wedge into her schedule, and borrowed dresses if she needed to attend a wedding or other formal event.

She says she didn’t feel deprived. Her secret weapon? Gratitude. She reminded herself that she had everything she needed, including the energy and income to shed college debt right away.

Her goal: Be out of debt by the time she turned 25. She’d earned her undergrad degree in three years to save money, and finished grad school with student debt totaling $36,262. It made her uncomfortable. “I don’t feel like I deserve it until I have paid for it,” she explains.

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Sarah McGowan
Sarah McGowan

Sarah knew frugality well. She was raised near Chicago by a millwright father and a mother who stayed home with the children until Sarah was in fifth grade, then became a real estate agent. Sarah was the first in her family to go to college. Student loans were essential, and she was thankful for them, but she didn’t want to keep them around any longer than necessary.

After earning her master’s degree in May 2016, Sarah landed a job in her field and worked 24-hour weeks, earning $28.23 an hour. She picked up extra shifts at a satellite hospital and at a nursing home – those paid close to $40 an hour – and she continued to babysit at $15 an hour. She said she typically tried to work at least 16 hours per week at her side jobs. Her total income was about $65,000, she recalls. The following year, when she finished paying off her loans, she says she made about $72,000.

While her earnings were high, she kept expenses low. She was used to multiple roommates, working almost all the time and driving an old car, so she wasn’t giving something up, just waiting to have it.

She recently connected with NerdWallet to share her story, which may inspire your own journey to paying off debt.

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If you feel like you're never going to get out from underneath your student loan debt, these five things could help you make a game plan
What was your debt when you started?

A little over $36,000 in student loans, for undergraduate and graduate school. I graduated with about $200 to my name.
What triggered your decision to ditch debt?

I wanted to get out of debt almost as soon as I got in. I knew that being in debt limited choices, and that it was temporary. I also thought that I would want to stay home with kids someday, and I could save more once the debt was gone.
What steps did you take?

I was careful not to get used to having money, and I just pretended I didn’t have money. I just kept paying all that I could toward the loans. I didn’t have a formal budget, but I was saving about $1,000 a month, and then using the “extra” money to pay more on loans.

My first student loan payment was not due until November (after a May graduation). But I started my job in July, so I started paying off the loan in August, when I had a paycheck.

[Sarah checked her debt balance about once a month, watching the incremental drops until she owed about $10,000. Because she had also been putting money in savings, she realized she could make a final lump payment and be done, while still having just under $10,000 in savings.]

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How did you avoid feeling deprived?

I tried really hard to keep a grateful mindset and to focus on what I did have instead of what I didn’t have. I wanted to get rid of the debt.

I talked to my boyfriend about what my goals were, and asked, “Can you be on board with this?” If anything, talking about it was a relief. He also had student loan debt to pay off. We went on a lot of dates that involved canoeing and picnics, or hiking and hot chocolate.

I still went on vacations. I love to travel, but I did it as cheaply as possible. I had saved babysitting money, and I went to Spain and Italy. I also used a $500 voucher from when I was voluntarily bumped from a flight to help pay for my ticket.

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How is being debt-free different?

I feel much more free. Now I can say no to a babysitting job if I want to. When I was in debt, I said yes to everything.

I feel more generous, because I have more.

I bought a Subaru. I saved a down payment first and I have a loan, but it’s at 0% interest and the payments are affordable. I also bought a violin and plan to start taking lessons.

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How to tackle your own debt

If Sarah’s story has inspired you to take a look at your own student debt, she has some tips:

    If you are paying off student loans, use direct debit – it saves a little on interest.

    Start paying off your loans as soon as you have an income. Don’t get used to having that money in your checking account.

    Continue to live as if you have not yet graduated. Even a year can help make serious headway. “Now I could never have four roommates,” Sarah says. But continuing to live with roommates made it possible for her to ditch debt much sooner.

And NerdWallet’s:

    It’s best to have a written budget. It doesn’t have to be elaborate, but you want to track your spending and make sure your money goes where you want it to.

    If your company offers a 401(k) match, contribute enough to take advantage of it. It’s free money.

    As you pay down debt, also put some money in an emergency fund. Even $400 can be enough to keep an unexpected expense from adding to your debt load.

Photo courtesy of Sarah McGowan
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Offline RE

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‘Enough is enough’: Warren officially introduces bill to cancel student debt

Aarthi Swaminathan
Jul 23rd 2019 9:36AM

Senator Elizabeth Warren (D-MA) is tripling down on student debt.

In an announcement today along with House Majority Whip James E. Clyburn (D-SC), the presidential candidate announced the “Student Loan Debt Relief Act of 2019.”

Warren’s first pitched her student debt plan as a presidential candidate in April, then again as a senator in June.

The plan attacks student debt in three ways: Cancelling debt, reforming the predatory — or “lousy” — student loan system that’s in place, and making college free for all.

The duo hopes that this would “end the student debt crisis,” on top of helping “millions of struggling families obtain financial stability” and closing the “racial wealth gap.” The move comes a day after Warren published a dire warning that the economy was in danger of collapsing.

“My very first bill when I got to the Senate was legislation to tackle the growing student debt crisis because I was sick of Washington allowing the wealthy to pay less, while burying tens of millions of Americans in mountains of student loan debt,” Warren said in the press release. “Since then, Washington has only allowed this crisis to get worse—especially for people of color. Enough is enough.”
What the plan says

There are more than a trillion dollars in outstanding student loans, affecting millions of Americans. Warren’s and Clyburn’s plan proposes a number of actions that would uniformly ease the financial pressure.

First they want to cancel up to $50,000 on student debt for people who earn a household income of less than $100,000. She also proposes automatic cancellation for these individuals.

This has been a contentious point, as with government debt to GDP projected to go up to 144% by 2049, such a measure could really hurt the U.S. economy.

They also want to help private borrowers such that they can convert their private student loans into federal student loans through refinancing. Which would then be eligible for debt cancellation.

This would make a difference especially for those who go to for-profit colleges and take on heavy debt loads to finance that education.

The duo also wants to make sure cancelled debt is not taxable income, allow a year long freeze on loan payments that borrowers make — on wage garnishments by Department of Education on troubled loans and interest that’s accumulated on student loans while the debt cancellation is being implemented — and also want to make allow borrowers to automatically refinance remaining federal student debt to interest rates specified in another one of Warren’s bills, Bank on Student Emergency Loan Refinancing Act.

Lastly, they also want to allow student loan borrowers to discharge their loans in bankruptcy, such as the Student Borrower Bankruptcy Relief Act of 2019.
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Offline azozeo

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Re: 🎓 Subprime Student Loans
« Reply #167 on: July 24, 2019, 10:02:44 AM »
What sticks in my mind on this topic is all the wasted money. Thank God it's FIAT !

For example......

A student has the intention to become a Prof. of History. He makes it all the way to PhD & then comes to find out it's all a lie. $100k + piss'd right down the drain
AND 8 years of wasted time.

If voting mattered to me (I don't resonate w/mob rule) I'd vote for this granny  :icon_mrgreen: Find 5 more like her & have 'em set up shop to rule the planet.

6 piss'd of grandmothers  should be able to handle 1 orange julius in a suit.
I know exactly what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world.
You don’t know what it is but its there, like a splinter in your mind

Offline RE

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🎓 These are the 15 worst US states for paying off your student loans
« Reply #168 on: July 24, 2019, 05:31:16 PM »

These are the 15 worst US states for paying off your student loans
Allana Akhtar

Occupy Wall Street demonstrators participating in a street-theater production wear signs around their neck representing their student debt during a protest against the rising national student debt in Union Square, in New York. Reuters/Andrew Burton

    South Dakota, Pennsylvania, and West Virginia are the worst states for student loan debt, according to personal finance website WalletHub.
    WalletHub determined the worst states for student debt by analyzing where students have the most debt and least job opportunities to help pay it off.
    South Dakota, Pennsylvania, and West Virginia are the worst states for student loan debt.
    Visit Business Insider's homepage for more stories.

The student loan crisis has become a nightmare for many Americans.

National student debt is now over $1.5 trillion, and many are struggling to pay off their loans.

Yet not all Americans suffer from the student debt crisis equally. Black families tend to have more debt than white ones, and the amount of debt you have could look different depending on which state you call home.

Read more: 10 mind-blowing facts that show just how dire the student-loan crisis in America is

In fact, there are some states where it is harder to pay off student loans than others, according to personal finance website WalletHub. WalletHub determined the worst states for student loan deb, where students not only have hefty loans, but also where it's hard to find high-paying jobs and have high costs of living.

WalletHub weighted a total of 12 different data points, divided into two groups: how much student loan debt burdens residents, and the number of opportunities for finding a job after college. The site used data from places like the US Census Bureau, the Bureau of Labor Statistics, the US Department of Education College Affordability & Transparency Center, and more.

Here are the 15 worst states for student loan debt.
15. Connecticut has the highest average student loan debt among all 50 states.
Joe Robbins/Getty

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 51.80

Rank among states with the highest student-loan debt: 11

Rank among states with high availability of jobs for postgraduates: 43
14. New Jersey is among the states where students have the most difficulty paying off their loans.
Walter Hickey / BI

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 52.44

Rank among states with the highest student-loan debt: 15

Rank among states with high availability of jobs for postgraduates: 28
13. Indiana ranked 29th in how many job opportunities the state has for graduates.
AP Photo/Doug McSchooler

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 52.53

Rank among states with the highest student-loan debt: 14

Rank among states with high availability of jobs for postgraduates: 29
12. Kansas ranked 19th in how many job opportunities the state has for graduates.
Via Wikimedia Commons

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 52.94

Rank among states with the highest student-loan debt: 16

Rank among states with high availability of jobs for postgraduates: 19
11. Delaware has the fifth highest overall student debt among residents.
University of Delaware/Facebook

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 53.79

Rank among states with the highest student-loan debt: 10

Rank among states with high availability of jobs for postgraduates: 32
10. Rhode Island is the worst state for finding a job after graduation.
Dan Logan/Shutterstock

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 54.89

Rank among states with the highest student-loan debt: 7

Rank among states with high availability of jobs for postgraduates: 50
9. Michigan residents have among the highest amount of debt as a percentage of their overall income.
University of Michigan/Facebook

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 55.19

Rank among states with the highest student-loan debt: 12

Rank among states with high availability of jobs for postgraduates: 8
8. Ohio ranked 14th in how many job opportunities the state has for graduates.
Matt Sullivan/Getty Images

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 58.67

Rank among states with the highest student-loan debt: 8

Rank among states with high availability of jobs for postgraduates: 14
7. Mississippi is the state with the highest percent of student-loan balances past due or in default.
"Welcome to Mississippi" sign. Shutterstock

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 59.56

Rank among states with the highest student-loan debt: 9

Rank among states with high availability of jobs for postgraduates: 2
6. Minnesota is among the states that have a higher proportion of people with student-loan debt.
Tim Roberts Photography/Shutterstock

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 60.46

Rank among states with the highest student-loan debt: 3

Rank among states with high availability of jobs for postgraduates: 45
5. Iowa has a relatively low unemployment rate for millennials compared to the other states with high student-loan debt.
University of Iowa Carver College of Medicine/Facebook

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 61.01

Rank among states with the highest student-loan debt: 6

Rank among states with high availability of jobs for postgraduates: 16
4. New Hampshire has among the highest proportion of students who graduate with student-loan debt.
Facebook/University of New Hampshire

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 63.24

Rank among states with the highest student-loan debt: 2

Rank among states with high availability of jobs for postgraduates: 37
3. West Virginia has many opportunities for students to find work after college, yet still has a high overall debt amount.
Steve Heap/Shutterstock

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 63.41

Rank among states with the highest student-loan debt: 5

Rank among states with high availability of jobs for postgraduates: 1
2. Pennsylvania has the second highest overall student-loan debt among residents.
William Thomas Cain/Getty Images

Overall score, based on the amount of student-loan debt and availability of jobs for postgraduates: 64.59

Rank among states with the highest student-loan debt: 4

Rank among states with high availability of jobs for postgraduates: 7
1. South Dakota is the state with the highest overall student-loan debt among its residents.
Scott Olson/Getty

Overall score, based on the amount of student-loan debt and availability of jobs for post-graduates: 66.17

Rank among states with the highest student-loan debt: 1

Rank among states with high availability of jobs for postgraduates: 46
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Offline RE

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🎓 Feds find potential fraud in student loan repayment plans
« Reply #169 on: July 27, 2019, 02:02:00 AM »

Feds find potential fraud in student loan repayment plans

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    By collin binkley, ap education writer

Jul 25, 2019, 6:50 PM ET

Betsy DeVos

Tens of thousands of federal student loan borrowers may be getting their monthly payments lowered by lying about their income and family size, yet the U.S. Education Department is doing little to catch them, according to a report released Thursday by a federal watchdog agency.

Among the most extreme cases reported by the Government Accountability Office are two separate borrowers who claimed to have 93 relatives in their households, along with 3,300 cases in which borrowers said they had no income even though federal data suggest they made $100,000 a year or more. All were approved for lower loan payments.

Investigators were reviewing the Education Department's oversight of its popular income-driven repayment plans, which allow borrowers to pay lower monthly rates based on their incomes and family sizes. After 25 years of payments, all remaining debt is wiped clean.

Education Secretary Betsy DeVos said her agency will conduct comprehensive review of the repayment plans and will refer cases of fraud to the Justice Department for prosecution. She placed blame on previous administrations, saying the problems are proof that "many of the policy ideas previously pursued were poorly implemented."

"Misrepresenting income or family size is wrong, and we must have a system in place to ensure that dishonest people do not get away with it," DeVos said. "We didn't create that problem, but rest assured we will fix it."

The federal watchdog agency says it identified 95,100 cases in which borrowers were approved as having no income even though it appears they were earning money. Using wage data from the Department of Health and Human Services, investigators found that borrowers in a third of those cases may actually have been making $45,000 a year or more, including some who topped $100,000.

They concluded that the department "does not have procedures to verify borrower reports of zero income, nor, for the most part, procedures to verify borrower reports of family size." Borrowers applying for the repayment plans can check a box indicating they have no income, and the department generally takes them at their word with no further documentation needed, the investigation found.

If approved, borrowers with no income typically are not required to make monthly payments.

The review also found 40,900 approved plans in which borrowers said they had family sizes of nine or more, which investigators said were "atypical" and amounted to statistical outliers. About 1,200 of those cases involved borrowers who said they had families of 16 or more. The department also does not require borrowers to provide documentation proving their self-reported family sizes.

The number of cases in which borrowers appear to have falsely claimed zero income amounts to 11% of plans investigators analyzed. Cases with unusual family sizes amounted to about 1% of plans reviewed. The amount of debt in all those cases combines to more than $6 billion.

The report warned that the Education Department could be losing thousands of dollars for every borrower who provides false information, but it didn't put an exact number on the potential loss. Federal payment plans based on income have surged in popularity in recent years and accounted for $414 billion in student debt last September.

Investigators acknowledged that their review doesn't necessarily prove fraud, but they emphasized that borrowers "may have a financial incentive to commit fraud to reduce their monthly payment amount."

"The weaknesses we identified raise questions about the strength of Education's institutional oversight of a major program involving hundreds of billions of dollars," the report said.

Education Department officials said they're crafting new processes to verify income and family size, but they noted that the agency doesn't have access to federal income data that could be used to verify borrowers' earnings. DeVos said Congress should authorize her department to access that data.

"If Congress provides the department with this authority, we could significantly reduce the risk of fraud and improper payments, save taxpayers money and reduce the burden on borrowers," DeVos said.

A bill approved in the Senate last year would have automatically sent borrowers' tax information to the Education Department, but the proposal didn't make it to a vote in the House. Sen. Lamar Alexander, R-Tenn., who co-sponsored the bill and chairs the Senate's Senate Health, Education, Labor and Pensions Committee, called on his colleagues to take up the proposal again.

"The Senate should pass again this year the bipartisan legislation that would prevent fraud and errors and make it easier for borrowers to repay their loans," he said.
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Offline RE

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I bet this one gets a Stick Save right before the semester begins.

Gotta love that -41F.  That's fucking Fairbanks in a nutshell.  lol


Alaska defunds scholarships for thousands of university students ahead of fall semester
After the University of Alaska lost 41 percent of its state funding, thousands of students were told Alaska would no longer be providing promised state scholarships.

A student walks by the Alumni Drive time and temperature sign on a particularly cold February morning.Todd Paris / UAF

July 28, 2019, 12:58 AM AKDT
By Ben Kesslen

Sian Gonzales found out he would no longer be receiving the almost $5,000 he has been awarded annually from the Alaska Performance Scholarship (APS) on July 9 — a month and a half shy of the first day of classes for his junior year at the University of Alaska, Anchorage.

Gonzales, 21, didn’t lose the scholarship money because his grades slipped or because he violated any school rules; instead, Gonzales and 2,500 other students in Alaska lost the scholarship because the state is no longer funding it.

“I’m scared,” Gonzales, a nursing student, told NBC News. Raised in Juneau, Gonzales decided to stay in Alaska for college in large part because of the APS, and even worked toward earning the scholarship during high school.

“Alaska is in dire need of nurses. After I graduate, I want to use my skills to help my people here in Alaska. I want to stay in Alaska” Gonzales said. And that's exactly what the APS was created to do.

The APS began awarding students money in 2012 to encourage bright high school seniors to stay in their home state for higher education and prevent a brain drain. The program has specific qualifications for students to be eligible, and some students, like Gonzales, spend their high school years taking certain classes, maintaining a high GPA, and studying to get good SAT or ACT scores in order to qualify. Gonzales is in Level 1, which means he gets $4,755 per year from the APS. The state also offered two other levels of the scholarship worth either $3,566 and $2,378 per year.

Now, that’s gone, and he’s left wondering how to fill the significant financial gap in such a short amount of time.
Image: Sian Gonzales
Sian Gonzales found out he wouldn't be receiving his Alaska Performance Scholarship for his junior year at the University of Alaska, Anchorage.Marina Ogai

Gonzales is in an even tougher situation because he has additional scholarships helping to fund his education that he will lose if he takes time off from school to save the money he's losing from the APS scholarship. Stuck in a bind, Gonzales says the only way out seems to be by taking on student debt.

“I worked really hard in high school,” Gonzales said. “I held up my end of the bargain, all the students on APS scholarships did. We earned that money.”

The legislature has tried and failed to restore the APS, which was defunded because of something called “the sweep.”

At the end of Alaska’s fiscal year in late June, the state “sweeps” a number of accounts that fund various state programs into its Constitutional Budget Reserve. Usually, when the new fiscal year begins in July, the state quickly reverses the sweep, and the funds return to the programs’ accounts. It’s a convoluted process that's required after Alaska voters approved a constitutional amendment in the 1990s mandating it.

The APS is funded through the Alaska Higher Education Investment Fund, which this year, Gov. Mike Dunleavy added into the sweep for the first time. But this year, a few Republican legislators blocked the three-fourths majority needed to refund the programs and the legislature failed to reverse the sweep, leaving the APS without funding. The Alaska Education Grant (AEG), which provides state-aid to low-income students was also caught up in the sweep.

A spokesperson for Dunleavy said the governor added the Alaska Higher Education Investment Fund to the sweep because it’s required by the state constitution, even though previous administrations did not include it. The blame for the APS’s defunding, the governor’s office says, lies with the legislature.
Meet the Press - July 28, 2019
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But lawmakers on both sides of the aisle want to see the reverse sweep happen and the APS restored.

State Sen. Natasha von Imhof, a Republican, told NBC News she’s worried about what a delay in funding or the total disappearance of the scholarship would do to the state. “We risk students either not going to college or going out of state,” she said. “We could stop this. We could initiate the reverse sweep. We just need three-fourths of the vote, it's a high threshold.”

State Rep. Sara Hannan, a freshman Democrat and retired high school teacher, told NBC News she doesn’t believe Dunleavy needed to include the APS in the sweep. The governor, Hannan said, took advantage of the divided Alaska legislature to further gut higher education opportunities in Alaska, knowing that getting a three-fourths majority to approve the reverse sweep would be difficult.

As the University of Alaska faces the governor’s unprecedented 41 percent cut in state funding, Hannan said taking away the APS has created a “perfect storm of bad politics and policy” that is ultimately falling hard on Alaska’s students.
Fears of 'brain drain' fly after 41 percent proposed cut to University of Alaska

As a teacher, when a family or student would come to Hannan with concerns about affording college, she would immediately point to the APS as their best path to higher education. “It’s near and dear to my heart,” she said. Now, Hannan is getting calls from constituents, worried about how to find affordable education in Alaska.

Stephanie Butler, executive director of the Alaska Commission on Postsecondary Education, said she has also been flooded with messages from concerned students and parents. Her office is the one that sent out the email that Gonzales and around 12,000 other students received, notifying them that grants and scholarships are not currently available.

“People are facing a payment deadline, and they don’t know if they’re going to be able to pay for their classes,” Butler said. Alaskans who received aid from colleges in other states are choosing to leave the state, where they think their grants will be more secure.

Teresa Wrobel, a rising senior at the University of Alaska, Anchorage, is losing her APS funding for her last year of college. So is her brother, who just finished his freshman year at the University of Alaska, Fairbanks. Her family is now figuring out how to pay for college, and will probably dip into savings intended for other purposes to keep Wrobel and her brother in school.

Wrobel, 21, a political science major, says she knows students who don’t plan to return to school in the August because of the lost funding.

“I’m lucky. I’m going to graduate,” Wrobel told NBC News. “But I said to my dad recently, ‘Maybe we should have my brother transfer.'”
Image: Ben KesslenBen Kesslen

Ben Kesslen writes for NBC News.
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Offline AJ

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Re: 🎓 Subprime Student Loans
« Reply #171 on: July 29, 2019, 03:15:58 AM »
We all know that rethuglicans hate college "educating" because it makes LIBERALS. Gotta stop that :laugh:.
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Elizabeth Warren: I could go to college on a waitress' salary. Americans can't do that anymore

By Elizabeth Warren

Updated 8:03 AM ET, Mon July 29, 2019

<a href="" target="_blank" class="new_win"></a>

Elizabeth Warren: The academic who made banking cool 13:31

"Elizabeth Warren is one of 10 presidential candidates taking part in a Democratic debate Tuesday, July 30, at 8 p.m. ET, on CNN. Ten others will debate on Wednesday evening. She is a US senator from Massachusetts. The opinions expressed in this commentary are her own; view more opinion at CNN."

(CNN)When I was 12, my daddy had a heart attack, and we thought he was going to die. He wasn't able to work for a long time. We lost our family station wagon and were an inch away from losing our home.
One day I walked into my parents' bedroom and there on the bed was the dress -- the one that only comes out for weddings, funerals and graduations. My mom was still in her slip as she paced around the room and repeatedly said, "We will not lose this house." She was 50 and had never worked outside the home. But she dried her tears, pulled on that dress, stepped into her high heels and walked to the Sears, where she got a minimum-wage job answering phones. That job saved our family.
I grew up in Oklahoma with three older brothers who all went off and joined the military. Growing up, I knew I wanted to be a public school teacher. But for that you needed a college degree -- and to get a college degree you needed money my family didn't have. Still, I figured it out. I got a scholarship and headed off to George Washington University.

Like a lot of Americans, my story isn't exactly a straight line. I dropped out of college at 19 after the first boy I ever loved asked me to marry him, and I got a job answering phones. Even though I thought my dream of teaching was over, I had a good job and a good life.
Elizabeth Warren: Americans don&#39;t need cliché financial advice. They just need to be paid more
Elizabeth Warren: Americans don't need cliché financial advice. They just need to be paid more
Then, I heard about the University of Houston. It was a public four-year college just 40 minutes away and tuition was just $50 a semester -- something I could afford on a part-time waitressing salary. I got my degree and went on to become a teacher for students with speech and learning disabilities. I got to live my dream.
My daddy ended up as a janitor, but I got to become a teacher, a law school professor, a United States senator and now a candidate for president because higher education opened a million doors for me. But the chances I got don't exist anymore.
States have cut investments per-student at community colleges and public four-year colleges -- and as a result, the schools have raised tuition and fees to make up the gap. The federal government has pushed families that can't afford to pay the sky-high costs of higher education toward taking out loans.
We're facing a student loan debt crisis today that's holding back a whole generation. It's an anchor on our economy, reducing home ownership rates and leading to fewer people starting businesses. This crisis is also forcing students to drop out of school before getting their degrees. We have to address this crisis head-on, and I have a plan for that.
My plan will cancel up to $50,000 in student loan debt for 95% of the people who carry it. At the same time, it will increase wealth for black and Latinx families and reduce both the black-white and Latinx-white wealth gaps. It'll be a huge middle-class stimulus that will boost our economy.
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My plan also includes making technical, two-year and four-year public college free because higher education shouldn't just be a privilege for the wealthy. As part of my commitment to address inequities in higher education, I will also invest a minimum of $50 billion into a fund for both Historically Black Colleges and Universities and Minority Serving Institutions. Another $100 billion investment over the next 10 years will go to Pell Grants so students can graduate debt-free.

The entire cost of my plan for broad debt cancellation and universal free college is covered by my Ultra-Millionaire Tax -- a small 2% tax on every dollar of net worth above $50 million, affecting just the 75,000 wealthiest families in America.
The time for half-measures is over. We can make big structural change and create new opportunities for all Americans.
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🎓 Student loan expert: 'The system is rigged’
« Reply #173 on: August 02, 2019, 10:44:32 AM »

Student loan expert: 'The system is rigged’
Aarthi Swaminathan
Finance Writer
Yahoo Finance August 1, 2019

The $1.5 trillion student debt crisis involves the federal government holding the vast majority of loans, and one student loan expert believes that “the system is rigged” because of that.

“The federal government has 92% of the [student loan] market. So just 8% is left with private lenders,” Consumer Bankers Association VP of Congressional Affairs and Director of Policy Kris Fallon told Yahoo Finance’s On The Move (video above). “The system is rigged in favor of the federal government.”

While presidential candidates and Senators are trying to fix the crisis — proposals range from total debt cancellation to expanding Pell grants — 44 million Americans hold student loans, and more than a tenth of the outstanding amount is in serious delinquency or in default in the first quarter of this year, according to the New York Fed.

The weak performance is a direct result of the federal government controlling the market, and the solution would be to open it up to private lenders, argued Fallon.

Because “private loans have a 98% repayment rate,” she explained. “So this is really a problem with federal student loans. There's a federal student loan crisis.”
"A graduating student wears a money lei, a necklace made of US dollar bills, at the Pasadena City College graduation ceremony, June 14, 2019, in Pasadena, California." (Photo: ROBYN BECK/AFP/Getty Images)
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"A graduating student wears a money lei, a necklace made of US dollar bills, at the Pasadena City College graduation ceremony, June 14, 2019, in Pasadena, California." (Photo: ROBYN BECK/AFP/Getty Images)
‘We made mistakes from the beginning’

How did 92% of student loans end up in federal hands in the first place?

For the past few decades, the overwhelming majority of student loans were controlled by banks or private lenders. They were guaranteed by the federal government because the borrowers were young and had little to no credit history.

The relatively small student loan market was then “considered a sleepy backwater in consumer finance,” former Consumer Financial Protection Bureau (CFPB) Ombudsman and current Executive Director of D.C.-based nonprofit Student Borrower Protection Center Seth Frotman told Yahoo Finance in a previous interview.

“We made mistakes from the beginning,” Sara Goldrick-Rab, professor of higher-education policy at Temple University told Yahoo Finance. “The mistakes were made, even in the 60s and 70s, in crafting the system itself… Our presidents since that time has inherited the system, and made choices about what to do about it.”

She added: “The real culprit for the current situation is Ronald Reagan. Because Ronald Reagan embraced the ideas that every student and family should be on their own. When it came to paying for college, so he did not make investments in the Pell grants. He made a major move to really just say, take a loan. And that has had downstream implications — he accelerated that movement.”

Over the years, regulators didn’t pay much attention. But as college costs began to climb, increasingly larger loans were taken out and that “backwater” industry became thriving and profitable.
College tuition has ballooned over the last three decades, driving student debt. (Source: The College Board)
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College tuition has ballooned over the last three decades, driving student debt. (Source: The College Board)

And when the Great Recession hit, the feeble economy placed a huge strain on borrowers, causing the banks and private lenders to face a credit crunch with bad assets on the books.

Congress bailed out these student loan lenders to “ensure students access to loans when lending in the nation's credit markets was frozen,” then-Education Secretary Arne Duncan wrote in an opinion piece in the Wall Street Journal in 2009.

But that takeover of mountains of new student debt was difficult to manage, and the Department of Education soon need up signing contracts with the old services again, like Navient, Nelnet, Great Lakes, and so on.
(Source: New York Fed)
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(Source: New York Fed)

Fallon’s proposal essentially calls for government to reset what happened during the recession and hand the student loans back to the private sector.

“And at the heart of that is addressing college costs,” she added. “Unfortunately, a lot of proposals that we've seen of late haven't addressed that.”

She also suggested putting “responsible caps” on these student loan programs, and improving financial literacy, so that borrowers “understand the loans that they're taking out.”

Ultimately, “there is a role for the federal government in higher education,” Fallon said. “But that role should really be limited to those most in need. And the private market should be allowed to serve those with greater means and the ability to access the private markets.”

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.
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🎓 Should Your Student Loans Really Be Cancelled?
« Reply #174 on: August 06, 2019, 03:11:48 AM »

28,634 views Aug 5, 2019, 08:32am
Should Your Student Loans Really Be Cancelled?
Zack Friedman
Senior Contributor
Personal Finance

U.S. Sen. Elizabeth Warren (D-MA) Photo credit: Getty Images (Photo by Ethan Miller/Getty Images)

If you read the latest student loan headlines, it seems all your student loans may be cancelled.

Should they really be cancelled?

Here's what you need to know.

Bernie Sanders: Cancel All Student Loan Debt

Sen. Bernie Sanders (I-VT), a 2020 presidential candidate, believes that all $1.6 trillion of student loan debt should be cancelled for the nation's more than 44 million borrowers. There is no criteria to receive student loan forgiveness. Everyone's student loan debt - including both federal student loans and privates student loans - gets cancelled.

Sen. Elizabeth Sanders (D-MA), a 2020 presidential candidate, also wants to cancel your student loan debt. Warren argues for a more concentrated student loan forgiveness proposal based on certain financial criteria. Warren's proposal would cancel $50,000 in student loan debt for every person with household income under $100,000, which could help millions of Americans. Her proposal also makes private student loan debt eligible for cancellation. Both Sanders and Warren want to fund these student loan forgiveness programs with new taxes.

If you have student loan debt, this may sound like a dream come true. However, not everyone may agree. Here's what proponents and opponents believe.

Student Loan Forgiveness: Proponents

Proponents of widespread student loan forgiveness believe it's one of the most important issues for the 2020 election. They believe that the student loan issue is a national crisis and that student loan forgiveness is necessary to save a generation from financial ruin. Proponents argue that student loan debt has disproportionately hurt people of color and has prevented younger Americans from starting a family and buying a home, which also adversely impacts the economy. Without wiping the slate clean, they argue, some borrowers will never be able to pay off their student loans.

Student Loan Forgiveness: Opponents

Opponents call these student loan forgiveness proposals massive wealth transfers. Someone - namely federal taxpayers - will pay for massive student loan forgiveness, opponents argue. The debt burden effectively transfers from student loan borrowers to taxpayers. Also, opponents argue that there are several additional weaknesses, including, among others:

    If you borrow debt, you should repay that debt. Opponents argue that mortgage holders or credit card holders don't get their debt forgiven.
    If everyone receives student loan forgiveness (as Sanders proposes), then presumably many wealthy student loan borrowers will benefit.
    If taxpayers bail out student loan borrowers, these borrowers still have an economic benefit - namely a college degree - which can help them earn higher income. However, critics say someone else besides the borrower has effectively funded that economic benefit for free, or nearly for free, which generally seems unfair.
    What about former student loan borrowers who already repaid their student loans? Are they out of luck?
    What about the colleges and universities that charge high tuition and cause many to borrow student loans? Opponents argue that colleges and universities should lower their tuition and be held financially responsible (along with taxpayers) when their students default on federal student loans.

Bottom Line

The 2020 presidential candidates and legislators alike from both major political parties will continue to debate the student loan issue. Some 2020 presidential candidates have weighed in on the future of higher education, how to manage growing student loan debt, and how to pay off student loans faster. Candidates including President Donald Trump, Mayor Pete Buttigieg (D-IN), U.S. Senator Kamala Harris (D-CA), U.S. Senator Kirsten Gillibrand (D-NY) and others have proposed everything from tuition-free college and bankruptcy to student loan refinancing and public service loan forgiveness.
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Zack Friedman
Zack Friedman

Zack Friedman is the author of the highly-anticipated, blockbuster book, The Lemonade Life: How To Fuel Success, Create Happiness, and Conquer Anything. Zack is the fou...
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Re: 🎓 Should Your Student Loans Really Be Cancelled?
« Reply #175 on: August 06, 2019, 03:59:45 AM »

28,634 views Aug 5, 2019, 08:32am
Should Your Student Loans Really Be Cancelled?

Student Loan Forgiveness: Opponents

Opponents call these student loan forgiveness proposals massive wealth transfers. Someone - namely federal taxpayers - will pay for massive student loan forgiveness, opponents argue. The debt burden effectively transfers from student loan borrowers to taxpayers.

You have to laugh at the fact that beneficiaries of previous massive wealth transfers are going "tsk, tsk" at a proposal that will benefit ordinary, non 1% human beings. the hilarity ensues.
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Americans are staying silent on student loan debt — and it's not helping
Student loans are one the most uncomfortable things for Americans to talk about. Here's why it's time to open up.
Image: college graduation]

Americans have amassed $1.5 trillion in student loan debt, with one in four Americans carrying a balance. Shutterstock

Aug. 7, 2019, 11:59 AM AKDT
By Megan Leonhardt, CNBC

When it comes to uncomfortable conversations, Americans would rather talk about pretty much anything else — politics, health issues, religion — than discuss their finances.

Yet the money topic Americans voted as most thorny is one that’s constantly in the news: student loans. Over a third of Americans say they see student loan debt as the biggest financial taboo, according to a Harris Poll of over 1,000 U.S. adults commissioned by TD Ameritrade.

A similar survey conducted by the MIT AgeLab and sponsored by TIAA found that 40 percent of respondents reported they never talk to their family about their student loans. In fact, over half said their families know “nothing” or “very little” about their debt.

Yet you’re far from unique if you’re swimming in student loan debt. Americans have amassed $1.5 trillion in student loan debt, with one in four Americans carrying a balance. And both the prevalence and the effect of student loans is widely studied: the Fed found that 20 percent of the homeownership decline among millennials (ages 24 to 32) can be attributed to this debt. Other surveys have found that student loan debt is forcing millennials to put off other major life milestones, such as getting married and starting families.

Democratic 2020 presidential candidates are even making student loan debt solutions a core component of their campaigns — promising everything from better refinancing options to introducing more debt forgiveness programs to wiping it out completely.

So why aren’t people talking about their student loans around the dinner table or with friends over drinks? It’s personal, experts say. “Student loan debt may be pervasive and a constant topic in the media and in the political arena, but it’s still debt,” Erin Lowry, author of Broke Millennial Takes On Investing, tells CNBC Make It. “People are fundamentally uncomfortable talking about debt because it’s easy to assume another person is going to pass judgment on your choices.”

And boy do they.

Those types of comments are on loans that are generally considered “good debt.” While a lot of people will cop to having student loans, it’s less common for people to comfortably disclose actual numbers, Lowry says.
Living with student loans long after class lets out

Playing his cards close to his chest is familiar territory for a 40-year-old lawyer living in South Carolina. Jay, who asked to be identified by a pseudonym to protect his privacy, says that while his loans are an open book with with his wife, he only talks in generalities with other family and friends. “Outside of how much we paid for our home, I don’t generally tell people about my finances,” he tells CNBC Make It.

People are fundamentally uncomfortable talking about debt because it’s easy to assume another person is going to pass judgment on your choices.

Erin Lowry

Despite graduating from law school eight years ago, Jay says he owes nearly $250,000 in student loans. So far, he’s paid over $80,000 on the loans, yet he owes more now than when he started. “It is frustrating,” he says.

But it’s not a complaint he shares widely because he doesn’t want to deal with the judgment around his balance and his decisions. “I went to law school a little later in life. I was married with two kids so I had to borrow a little more than I wanted to,” Jay says.

Adele Nathan, a 33-year-old physical therapist in Chicago, is also reluctant to share to discuss the details of her student loan debt with people. “I don’t have any shame associated with it,” she says. “That being said, unless it’s a close friend or family member, I don’t really ever share the amount I had to take out.”
Student loans: What kids and their parents need to know

Nathan is paying down about $260,000 in student loans she took out for her physical therapy degree. “Most people in my profession had to take out loans for grad school, so it’s common parlance in the workplace,” she says. But while she rates herself as pretty open about money and financial topics, when she’s out with friends who work in different industries, student loans are “just not what we talk about, ” she says. “They just don’t get it,” she adds.

Her debt isn’t going anywhere fast, even though she’s paying about $300 a month toward her loans. At that rate, she’s putting about 15 percent of her monthly take home pay toward her loans, but that doesn’t even cover the interest.

“At my salary, there’s absolutely no way for me to pay this off in less than five years while living in a major U.S. city,” Nathan says. To cope, she says she “compartmentalizes” her student loan debt, ignoring it whenever she can. “I allow it to resurface every year when I have to reapply, but then I shove it right back down.”

Nathan calls her loans a “baseline stressor, ” but she says it could be much worse. Her coping mechanism has allowed her to, as she puts it, “say yes” to many life experiences, including getting married, starting a family and taking new jobs. Although that may change as Nathan and her husband gear up to buy a home. “I’m waiting for the other shoe to drop — I’m wondering how much [the student loans] will impact our decision to buy and what we’re offered as a mortgage,” Nathan says.
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🎓 As Student Debt Rises, Teens Are Rethinking the College Experience
« Reply #177 on: August 11, 2019, 01:07:27 AM »

As Student Debt Rises, Teens Are Rethinking the College Experience

How do you choose a college in 2019? The school ranking? The sports? The parties? Try the menacing threat of crippling student loans

Jake, a high school junior in Utah, is just starting the college application process. He’s looking for a school with good biology and chemistry departments, as well as an Army ROTC program in case he decides to enlist. Penn State, his top choice, has it all. But Jake’s top priority isn’t student athletics, a high college rank or a vibrant party scene — it’s to graduate debt-free.

“I’m a lower-middle-class citizen,” he says. “I have to pay for my own tuition, and if I can’t manage that I’m afraid I’ll get stuck in the cycle of debt that seems to plague my economic class.”

For the past few years, college debt — now the highest it’s ever been — has risen from a taboo dinner topic to one of our most pressing political issues. Democratic presidential candidates Elizabeth Warren and Bernie Sanders are leading the conversations with legislative proposals for free public college tuition and student-loan debt forgiveness.

These plans have sparked endless chatter among the pundit class. But what of the high schoolers they’d affect first-hand? Some graduates, mired in debt, have decided to just wait it out and pray our next president will save them. On the other side, I spoke with high schoolers who’ve accepted their fate, however bleak it looks. For these teens, future finances weigh heavily on their impending college decision.

Andrew, a 17-year-old in North Carolina, is among the two thirds of Generation Z for whom college debt is a “top concern,” according to the book Gen Z @ Work. He says these progressive proposals “sound great,” but he believes he’d be “well out of college before anything happens.” Debt anxiety influenced Andrew’s decision to spend two years at Haywood Community College in Clyde, North Carolina. (According to a new study by TD Ameritrade, 89 percent of Gen Z say they’ve considered an education route that’s not the traditional four-year institution.)

“Community college for prep will be cheapest, and then I’m going to the cheapest university afterward,” he says. Doesn’t he resent missing out on the typical college experience? “Nah, I’m just risking not living in a dorm, which seems scary and possibly sucky if you hate your roomie,” he says. “I won’t be able to go to college parties like others, but I don’t get invited to any now anyway.”

Besides, Andrew’s seen what happened to previous generations, and he adamantly wants to avoid the same financial pitfalls: “All I ever hear is how unaffordable living on the budget of a minimum wage job is between debt, apartment fees and food.”

Before college applicants like Andrew can begin to worry about what a candidate might offer them down the road, they’re busy learning how to apply and pay for school right now. Faced with high application fees and a complex Common App system, many students — especially first-generation college students — are feeling overwhelmed. According to a 2019 study by the U.S. Department of Education, an estimated 33 percent of postsecondary education students have parents who did not attend college.

“Everyone in my family is new to the college process,” says Steven, a 17-year-old from California. He’s applying to 10 colleges for the 2020-2021 school year, including the University of California, Berkeley, and Stanford University. He calls the process slow and confusing, and he feels isolated: “I am alone when it comes to researching what I need and getting all important information.”

Zach, a first-generation college student from Fulton, Mississippi, “didn’t have a clue” what he was doing while applying for colleges. “My school counselors didn’t really help; college advisers I emailed didn’t even reply,” he says. “The main thing I didn’t know was where to go to take loans out.” Zach eventually posted on the subreddit r/applyingtocollege to ask for advice and guidance, and after consulting with friends and family, he asked his parents to take out a federal Direct PLUS loan. (Warren’s recently proposed student debt bill would make Direct PLUS loan holders eligible for debt cancellation, reported CNBC.)

Even for more fortunate students who plan to pay off their tuition costs in real time, there’s still worry about the trauma of college debt looming large over the entire country.

Tim is a sophomore at Purdue University. He and his parents picked the Indiana school largely because the price of tuition is frozen and won’t increase during his four years. Come graduation, they’re expected to owe somewhere between $35,000 to $50,000, which they plan to pay in full.

Nevertheless, he still experiences a sort of debt trauma when he sees how “extremely worried” his friends are about tuition. “Student debt is always lingering in the back of everyone’s mind,” Tim says. The only way he can make sense of it is to turn the fear of debt into college motivation. His mantra: “Do my best at every class, making sure I don’t have to retake any classes and spend more time and money in college.”

Joseph Longo is a culture and entertainment journalist whose work has appeared in The Associated Press, Entertainment Weekly and more. He's still trying to understand what it means to be a Gemini Rising.
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🎓 'Severely derogatory': U.S. student debt defaults have 'grown stunningly'
« Reply #178 on: August 14, 2019, 02:04:49 AM »

'Severely derogatory': U.S. student debt defaults have 'grown stunningly'



'Severely derogatory': U.S. student debt defaults have 'grown stunningly'

Aarthi Swaminathan
Finance Writer
Yahoo FinanceAugust 13, 2019

Total U.S. household debt increased for the 20th consecutive quarter this year, rising by $192 billion to $13.86 trillion, according to the New York Fed.

And the data reveals an unsettling truth about student loan balances, which are at alarming levels of missed payments.

Fed researchers noted that “in the second quarter of this year, the outstanding severely derogatory balance is comprised of 35 percent defaulted student loans, which have grown stunningly since 2012.”

(Source: Liberty Street Economics)
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Severely derogatory refers to “any stage of delinquency paired with a repossession, foreclosure, or ‘charge of’” (meaning that the lender has removed the debt from its books),” the report explained.

The increase in overall household debt was “boosted primarily by a $162 billion gain in mortgage installment balances,” the Fed’s Quarterly Report on Household Debt and Credit explained.

While consumer spending has been resilient amid the U.S.-China trade war, two components within household debt are seeing worsening performance.

(Source: New York Fed)
View photos

Student loans

Student loans are the biggest red flag.

While outstanding student debt declined slightly from $1.49 trillion in Q1 to $1.48 trillion this quarter — a “typical change” for the quarter, the report stated — the proportion of student loan borrowers who are unable to pay back their loans has increased rapidly.

(Source: NY Fed)
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And the pressure to repay their student loans — which in many cases exceeds tens of thousands of dollars — affects borrowers in several ways.

A separate study by JPMorgan Chase Institute, which looked at 4.9 million checking accounts, found that some families are spending up to 17% of their annual income as they repay their debts. They’re even putting off “basic necessities,” in some cases, the study noted.

(Source: NY Fed)
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Auto loans

Auto loans were also a component that the Fed highlighted in its report.

Behind student loans, auto loans in Q2 formed 21% of the outstanding severely derogatory balance, which was “a larger share than what we’ve seen historically as the auto loan market has expanded and auto loan delinquencies have been increasing for subprime borrowers in the past five years,” the report stated.

The data also showed that the 18 to 29 demographic has been the demographic that is increasingly missing their auto loan repayments, leading the auto loans that are transitioning into serious delinquency.

The fact that millennials are falling behind on their payments is a trend that Yahoo Finance has noted in the past.

(Source: NY Fed)
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Credit cards

In addition to the two components the Fed flagged, credit card debt — the “most popular and common form of credit used by consumers,” according to the NY Fed — also saw a notable increase.

Overall, credit card balances increased from from $848 billion in Q1 to $868 billion in Q2.

And an increasing number of credit card balances were transitioning into serious delinquency, the report noted, from 5% in Q1 to 5.2% in Q2. That reflects “an upward trend that began in 2017,” stated the report.

The 18 to 29 demographic again, was leading serious delinquencies, the Fed’s data revealed.

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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🎓 How Much Student Debt Does Each State Hold?
« Reply #179 on: August 15, 2019, 12:46:43 AM »

How Much Student Debt Does Each State Hold?

Published 8 hours ago

on August 14, 2019

By Iman Ghosh

Student Debt Per Capita by State
How Much Student Debt Does Each State Hold?

Education may be priceless, but the costs of obtaining it are becoming steeper by the day.

Almost half of all university-educated Americans rely on loans to pay for their higher education, with very few graduating debt-free. Total U.S. student debt has more than doubled in the last decade—reaching a record high of $1.5 trillion today.

Today’s data visualization from breaks down the average student debt per capita, to uncover which states shoulder the highest burden in this growing crisis.
Students are Paying Through the Nose

Before diving into the graphic, let’s take a quick look at why student debt is racking up. The ballooning costs to attend college today compared to thirty years ago is one driving factor.

College Tuition
Source: The College Board 2018 report.

What’s more, these figures don’t include the expenses for accommodation and other supplies, which can add another $15,000-$17,000 per year.
The United States of Student Debt

In the state map above, it’s immediately obvious that Washington D.C. tops the list. While the nation’s capital is the most educated metropolitan area in the country, it also suffers from $13,320 in student debt per capita.

At approximately 147% above than the national average of $5,390, Washington D.C.’s debt burden per capita is almost double that of the state in second place. Georgia comes in with $7,250 debt per capita, 34.5% above the national average.
State   Student Debt per Capita   Difference from Average
U.S. Average   $5,390   
Alabama   $4,920   -8.7%
Alaska   $4,030   -25.2%
Arizona   $5,170   -4.1%
Arkansas   $4,330   -19.7%
California   $4,530   -16.0%
Colorado   $6,180   14.7%
Connecticut   $5,890   9.3%
Delaware   $6,040   12.1%
District Of Columbia   $13,320   147.1%
Florida   $4,940   -8.3%

Rounding out the five states with the most student debt per capita are Maryland, Minnesota, and Ohio, in that order. On the flip side, Wyoming has the least debt per capita ($3,610), which is 33.0% lower than the national average. Hawaii follows right behind at $3,780, and 29.9% below the national average.

Interestingly, a growing population on the West Coast helps to lower the debt burden for states like California, even despite the strong presence of prestigious schools. Home to Stanford, USC, UCLA, CalTech, and more, the Golden State surprisingly only has $4,530 in debt per capita.
The Last Straw?

Today’s Americans are more educated than ever before, but the sticker shock is causing some whiplash. This overall trend of spiraling student debt has significant implications on a person’s life trajectory. With many graduates unable to repay their loans on time, more of them are delaying major life milestones, such as starting a family or becoming a homeowner.

In efforts to curb this crisis, many 2020 presidential hopefuls have already started proposing plans to cancel or forgive student debt—with close attention on mid- to low-income households that would benefit the most from reduced loans.

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Visualizing the Evolution of Consumer Credit

See how consumer credit has evolved through the ages — from its ancient origins, to the use of game-changing technologies like artificial intelligence.

Published 6 days ago

on August 8, 2019

By Jeff Desjardins

The origin of credit dates all the way back to ancient civilizations.

The Sumerians and later the Babylonians both used consumer loans in their societies, primarily for agricultural purposes. The latter civilization even had rules about maximum lending rates engraved in the famous Code of Hammurabi.

But since then, consumer credit — and how we calculate creditworthiness — has gotten increasingly sophisticated. This is so much the case that technology now used in modern credit scoring would seem completely alien to people living just a few decades ago.
Video: Consumer Credit Through the Ages

Today’s motion graphic video is powered by Equifax, and it shows the evolution of consumer credit over the last 5,000 years.

The video highlights how consumer credit has worked both in the past and in the present. It also dives into the technologies that will be shaping the future of credit, including artificial intelligence and the blockchain.
A Brief History of Credit

We previously visualized the 5,000-year history of consumer credit, and how it dramatically changed over many centuries and societies.

What may have started as agricultural loans in Sumer and Babylon eventually became more ingrained in Ancient Roman society. In the year 50 B.C., for example, Cicero documented a transaction that occurred, and wrote “nomina facit, negotium conficit” — or, “he uses credit to complete the purchase”.

Modern consumer credit itself was born in England in 1803, when a group of English tailors came together to swap information on customers that failed to settle their debts. Eventually, extensive credit lists of customers started being compiled, with lending really booming in the 20th century as consumers started buying big ticket items like cars and appliances.

Later, the innovation of credit cards came about, and in the 1980s, modern credit scoring was introduced.
The Present and Future of Credit

Learn about the modern credit landscape, as well as how technology is changing the future of consumer credit.

The modern numeric credit score came about in 1989, and it uses logistic regression to assess five categories related to a consumer’s creditworthiness: payment history, debt burden, length of credit history, types of credit used, and new credit requests.

However, in the current era of big data and emerging technologies, companies are now finding new ways to advance credit models — and how these change will affect how consumers get credit in the future.

Modern Tech

Consumer credit is already changing thanks to new methods such as trended data and alternative data. These both look at the bigger picture beyond traditional scoring, pulling in new data sources and using predictive methods to more accurately encapsulate creditworthiness.

Future Tech

In general, the future of credit will be shaped by five forces:

    Growing amounts of data
    A changing regulatory landscape
    Game-changing technologies
    Focus on identity
    The fintech boom

Through these forces, new credit models will integrate artificial intelligence, neural networks, big data, and more complex statistical methods. In short, credit patterns can be more accurately predicted using mountains of data and new technologies.

Finally, the credit landscape is set to shift in other ways, as well.

Regulatory forces are pushing data to be standardized and controlled directly by consumers, enabling a range of new fintech applications to benefit consumers. Meanwhile, the industry itself will be focusing in on identity to build trust and limit fraud, using technologies such as biometrics and blockchain to prove a borrower’s identity.

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Chart of the Week
Mapped: The Countries With the Highest Housing Bubble Risks

Which real estate markets have the highest risk of seeing a correction? These maps highlight housing bubble risks using data from four key indicators.

Published 4 weeks ago

on July 19, 2019

By Jeff Desjardins
Mapped: Countries With the Highest Housing Bubble Risks

With a decade-long bull market and an ultra low interest rate environment globally, it’s not surprising to see capital flock to housing assets.

For many investors, real estate is considered as good of a place as any to park money—but what happens when things get a little too frothy, and the fundamentals begin to slip away?

In recent years, experts have been closely watching several indicators that point to rising bubble risks in some housing markets. Further, they are also warning that countries like Canada and New Zealand may be overdue for a correction in housing prices.
Key Housing Market Indicators

Earlier this week, Bloomberg published results from a new study by economist Niraj Shah as he aimed to build a housing bubble dashboard.

It tracks four key metrics:

    House Price-Rent Ratio
    The ratio of house prices to the annualized cost of rent
    House Price-Income Ratio
    The ratio of house prices to household income
    Real House Prices
    Housing prices adjusted for inflation
    Credit to Households (% of GDP)
    Amount of debt held by households, compared to total economic output

Ranking high on just one of these metrics is a warning sign for a country’s housing market, while ranking high on multiple measures signals even greater fragility.
Housing Bubble Risks, by Indicator

Let’s look at each bubble risk indicator, and see how they apply to the 22 countries covered by the housing dashboard.

It should be noted that most of the measures here are shown in an index form, using the year 2015 as a base year. In other words, the data is not representative of the ratio itself—but instead, how much the ratio has risen or fallen since 2015.
1. House Price-Rent Ratio

When looking at housing prices in comparison to rents, there are four countries that stand out.

New Zealand (196.8) and Canada (195.9) have seen ratios of housing prices to rents nearly double since 2015. Meanwhile, Sweden (172.8) and Norway (168.2) are not far behind.

Elsewhere in the world, this ratio is much more in line with expectations. For example, in Portugal—where house prices have skyrocketed over recent years—rents have increased at nearly the same rate, giving the country a 99.2 score.
2. House Price-Income Ratio

There are three familiar names at the top of this bubble indicator: New Zealand (156.8), Canada (155.3), and Sweden (145.7).

In places where rents are lagging housing prices, so are the levels of household income. For how long will people afford to buy increasingly expensive houses, if their incomes continue to lag?
3. Real House Prices

Real house prices have increased in all of the 22 markets, with the exception of Italy (95.5).

For this indicator, there are five markets that stand out as having fast-rising prices: Portugal (131.8), Ireland (127.6), Netherlands (121.9), Canada (124.1), and New Zealand (121.9). The latter two (Canada/New Zealand) have appeared near the top of all three bubble indicators, so far.
4. Credit to Households (% of GDP)

Exceedingly high debt ratios point to a strain on consumer finances – and when finances are strained, the chance of a default increases.

Switzerland (128.7%), Australia (120.3%), and Denmark (115.4%) top the list here with consumer debt far exceeding country GDP levels. However, Canada still makes an appearance in the top five with a debt-to-GDP ratio of 100.7%.
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