![]() New car loans have an average monthly payment of $500. today is just under $30,000 for new cars and over $19,000 for used cars. These borrowers are not so much in financial difficulty as they are hoping to win the lottery by having their loan balances wiped away simply by political pandering for young voters. This is similar to the many homeowners who could have paid their mortgages back in 2007-2010 but choose to go into foreclosure because their home values had plummeted. They may have jobs and plenty of income, but they are not paying their student loans mainly because politicians like Senator Bernie Sanders keep promising them student loan forgiveness. In contrast, a second group in default are the strategic defaulters. These defaulters may have little income and understandable reasons for not paying on their student loans. Others never finished college thanks to some life event that interrupted their studies. Some were taken in by the inflated promises of for-profit colleges that really just want students for those student loan dollars that form the vast majority of their revenue. These defaulters typically have very low balances, often under $10,000, but never completed their degrees. Within those defaulting on their student loan debt lies a group of borrowers with legitimate problems. The oft-highlighted stories of the humanities major with a six-figure loan balance is not a good description of the situation. ![]() However, the average student loan balance for students in default is only $16,381 according to a recent report by Demos, virtually identical to the $15,654 balance for people paying on their student loans. ![]() The rate of borrowers who are in default or more than 90 days past due is approaching 40% and total student loan debt is around $1.4 trillion, making it sound like this is a problem of out-of-control ballooning debt. ![]()
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