Sobering numbers about student loan debt in the segment on this morning’s Today show:
There are 44 million people with outstanding student loans
The total amount of debt is 1.5 Trillion dollars (more than mortgages, car loans, etc, per the report)
The average loan debt is 30K per person
This one shocked me: 250 Billion is owed by people 50 and older (yikes). They did not say if that included grad/professional school loans, but I would think so.
They talked about generations of families with student loan debt. Ouch.
I wonder how much of that student loan debt for people over 50 is Parent Plus loans? Those are like the payday loans of student loans. Right now they’re running close to 12% interest if you include the 4% origination fee.
I would think if they’re not Parent Plus, they would have to be graduate school loans. I didn’t think any loans were allowed to go more than 25 years? I have no personal experience with them though, so maybe I’m wrong. Can IBR go on forever? Yuck.
I missed the segment, because I had to leave for work before it was on. But I know for a fact that there are plenty of people over 50 who are paying on their own student loans. I am disheartened by the total debt of my graduates (undergrad loans, grad loans and interest accrued to date). A number of them will absolutely still be paying when they are over 50. I receive servicer information about the repayment plans our graduates are enrolled in, and many of them are in income driven plans. If students who graduate when they are in their 30’s are paying minimum IDR payments, they will be in their 50’s before the loans are repaid (or forgiven … which comes with a big tax hit). I am doing my best to help them make wise borrowing and repayment choices, but I worry about what their debt means for their financial futures.
I will have grad school loans into my early 50s, but it’s by choice. I consolidated the loans so that the payments are less than the monthly payments on the maximum federal undergrad loans and my interest rate is 1.5%. There is absolutely no financial reason for me to pay them off early. I’m sure I’m not the only one leveraging student loan debt in this way, but I’m likely in a tiny minority, that really shouldn’t be lumped in with these “crisis” statistics. My house will be paid off before my student loans. lol
@mamom I am curious what the thought process was for your cousin to incur that debt so late in her working life.
@itsgettingreal17 - my sister is an MD with student loans and I appreciate her perspective on repaying them - she considers them a payroll deduction as a cost of doing her job. That helps me reconcile the loans my kids will take out if they end up in the same field!
It was hyperbole. But, I do think 12% rates on Parent Plus loans are crazy high especially with a current Fed rate of 2.5% and offering an insane amount to parents and calling it financial aid is even worse.
If you don’t like the 12% rate, don’t take the loan. I really think Parent Plus loans should be more limited and require more qualifications and I realize that means some student would not be able to attend their school of choice. I’m okay with that.
People argue that interest rates are too high, argue there is too much student debt and too much overdue debt, but then want the rates lowered. I think it is time for a little tough love and that parents have to be told no, you can’t borrow at 9% or at 12% or even at 15% -sorry, lending you this money is a BAD idea.
Oh, there isn’t a chance in hell I would ever take one, no worries there.
I really believe letting parents borrow all the way up to the cost of attendance regardless of their ability to repay is complete insanity and is contributing to the whole student loan crisis. It’s just driving up the price for everyone.
Without knowing the default rate, it is hard to tell whether that interest rate is too high relative to the risk that the lender bears. Of course, if the rate is set lower than it ordinarily would be based on the cost of money and the default risk, that would be a subsidy (perhaps intended).
12% is a bargain as these are UNSECURED loans. The lender has no asset it can take and sell to pay off the loan if the borrower defaults. The reason mortgages have lower interest rates is because they are secured by an asset.
Help yourself to all that bargain money. I’ll pass. I’m not saying the banks aren’t right to charge it…just that I could never stomach paying it personally.
Total mortgage debt outstanding is $15.5T right now, so no, student loans are nowhere near that. However, with a mortgage, you are gaining ownership of something tangible and you’d need to pay for housing somehow if you didn’t get a mortgage.
