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Banks writing off $3 billion of student loan debt within the first two months

By Catholic Online (NEWS CONSORTIUM)
March 26th, 2013
Catholic Online (www.catholic.org)

There was a time when a good education was a guarantee of a better life and better jobs. Not so much this years - banks have written off $3 billion in student loan debt in just the first two months of 2013. These figures are up 36 percent from last year. Adding to the bleak picture is the fact that many graduates remain jobless, underemployed or cash-strapped in a slow U.S. economic recovery, an Equifax study showed.

LOS ANGELES, CA (Catholic Online) - Equifax also reported that student lending has grown from 2012, due to more people going back to school coupled with the rising cost of higher education.

"Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs," Equifax Chief Economist Amy Crews Cutts said in a statement. The credit company analyzed data from more than 500 million consumers to track financial trends in their latest report.

U.S. student loan debt reform has become a more pressing issue since the U.S. Consumer Financial Protection Bureau reported in March of last year that the total surpassed $1 trillion by the end of 2011. Interest rates on subsidized Stafford loan rates are set to double in July.

The cost of earning a four-year undergraduate degree has gone up by 5.2 percent per year in the last decade, which has forced more students to take out loans. While other forms of debt went down, student loan debt continued to rise through the economic crisis.

Delinquencies have risen in the last eight years, with about 17 percent of the nearly 40 million student loan borrowers at least 90 days past due on their repayments.

A federal consumer agency, the CFPB is concerned that high student loan debt could affect the rest of the economy as it affects borrowers' credit and could limit their ability to make important purchases such as a home or car.

The CFPB is taking several steps to help reduce the student debt burden on borrowers. They are introducing ways to offer more flexible repayment options from private lenders and trying to exert more supervisory authority over non-bank student loan servicing companies.

Groups such as the New America Foundation, a nonprofit public policy institute, have said the current student loan repayment system is too complicated for borrowers. They argue that an income-based repayment system could simplify the process. Some students don't know how to enroll in the different repayment options or put repayment off to take care of more urgent bills such as credit cards and rent.

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