According to the New York Federal Reserve, nearly 10 years out of college the 2005 cohort of study loan borrowers has paid down only 38 percent of its original student debt. Those are numbers that could impact us all if they stunt our economic recovery.
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Study loan : High Balance Student Loan Borrowers Skirt Default, Still Struggle
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3. It’s true that borrowers with less student debt
actually default in higher numbers. Borrowers who
drop out of college rack up less debt because they’re
not in school for as long.
Without a degree or certificate, these borrowers are
less likely to earn the income needed to retire the
debt and, therefore, are at a higher risk for default.
The Federal Reserve numbers show that more than
30 percent of borrowers who left school in 2009
owing less than $5,000 in student loans experienced
a default.
On the other hand, that same study shows only about
15 to 20 percent of the high-balance borrowers of
the 2009 cohort have defaulted.
4. In fact, according to the Federal Reserve, "borrowers
who start out owing more than $50,000 are at risk
for bad outcomes almost to the same extent as small-
balance borrowers owing less than $5,000."
That’s because default, which doesn’t officially occur
for federal student loans until 270 days of
nonpayment, isn’t the only bad outcome.
5. That’s not always a worst-case scenario for the
borrower.
More and more high-balance borrowers are
beginning to take advantage of income-based
repayment programs that require only small
payments tied to income and forgive any outstanding
balance after 10, 20 or 25 years.
Taking advantage of income-based repayment plans
can help borrowers more effectively balance
education debt payments with other financial
priorities.
It’s definitely better than letting student loans slip
into delinquency and default. But it can also mean
holding an increasing load of debt on your credit
record, which could diminish your chances of
securing other types of credit.
6. The use of deferments and forbearances to postpone
payment of a federal student
Deferments and forbearances can be lifelines to
borrowers facing imminent– the process whereby
accrued interest is added to the principal balance
and interest is then charged on the new larger
balance.
7. According to the New York Federal Reserve, nearly
10 years out of college the 2005 cohort of study loan
borrowers has paid down only 38 percent of its
original student debt.
Those are numbers that could impact us all if they
stunt our economic recovery.
Source: (http://bit.ly/1keq4W1)