http://www.economist.com/node/21534792
Signs of strain are everywhere. In September the Department of Education reported that in 2009 the default rate, which is defined as non-payment for 270 days, had reached 8.8%. By some estimates delinquency rates, an earlier indicator of stress, for student loans exceed 10%, ten times that for credit cards and car loans. Ms Loonin’s average client has a low-paying job, $30,000 of debt and is in arrears.
This is despite punitive laws to enforce repayment. In response to clever students burying their obligations in court during the 1970s, anti-default provisions were imposed to make it almost impossible to shed student loans in bankruptcy. In 1991 the statute of limitations for non-repayment was eliminated.
Many troubled borrowers could avoid default if they used government options to consolidate their loans and make minimum payments, says Ms Loonin, but they are unaware of the possibility. Their primary contact with the industry after being granted a loan is through collection agents who are compensated based on how much they collect, and who therefore have little incentive to explain alternatives.
There are increasingly loud calls for reform of the system, with demands that range from a full-fledged bail-out of borrowers to a phased curtailment of government lending. For now the bail-out is the bigger priority for politicians. For many years government-backed loans were distributed through banks which earned a fee and occasionally had to assume a little bit of risk, but in 2009 the business was entirely absorbed by the federal government.
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D - similar to the Canadian situation in that respect. The Boomers used generous bankruptcy laws to belly-up on their student loans. (You could not even list it on their credit report!) Once finished their education, they then sealed the loophole - and increasingly clamped down through the mid to late '90s.
Nice.
Default by institution type. Oddly. college grads do so more than universities, though less than private institutions.
lj.ca/archive/articles/37_12_schwartz.pdf
http://www.hrsdc.gc.ca/eng/hip/cslp/statistics/08_st_DefaultRatesCanadaProvinces.shtml
D - the default rate was lower '97 to 2000. Why? That is exactly when they introduced the 2 -then 10- year rules for defaulting. This is exactly the gill net that scooped up this fish.
These days, students default cuz they're broke, not cuz they want to.
Looks like my knowledge of student loans has become a bit dated.
I admit, Johnson's idea to just fund biz and tech training looks narrow but with focus. I imagine we'd not have huge #s of kids pouring into the liberal arts if there were no loans attached. Then we'd not have co-op art degrees being treated as 'polishing schools' - they'd be pure academia. The few, the proud - those for the learning.
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