from
(snip)"The number of student loans held by subprime borrowers is growing, and more of those loans are souring, the latest signs that a weak job market and rising debt loads are squeezing recent graduates.
In all, 33% of all subprime student loans in repayment were 90 days or more past due in March 2012, up from 24% in 2007, according to a Wednesday report by TransUnion LLC.
Meanwhile, the Chicago-based credit bureau found that 33% of the almost $900 billion in outstanding student loans was held by subprime, or the riskiest, borrowers as of March 2012, up from 31% in 2007.
"If you become subprime, it's more likely that you will not pay your debt," said TransUnion Vice President Ezra Becker, who oversaw the study.
The high debt loads could weigh on consumer spending and the economy, said Cristian de Ritis, a senior director with Moody'sMCO +0.05% Analytics, a unit of Moody's Corp. If the defaults continue to increase, "the taxpayer is going to be on the hook for losses," he added.
The federal government has taken a more active role in student lending and now makes about 93% of all loans.
Another study, released by Fitch Ratings, a unit of Fimalac SA FIM.FR 0.00% and Hearst Corp., Wednesday, warned that the gap between college costs and what students can borrow under the federal student-loan program will continue to widen.
TransUnion performed its study at the request of credit unions, which make private student loans.
In the five years through last March, the portion of all student loans that were 90 days or more delinquent rose to 11.4% from 8.8%, while the average student- loan balance per borrower increased 30% to $23,829, TransUnion found."(snip)
For better or for worse, the recent rule changes regarding gov't backed student loans virtually guarantees that the student loan delinquency situation will get much worse before it gets better.
- Regardless of how large your monthly student loan payment is 'supposed' to be, all that you are now actually required to pay is 10% of your 'discretionary' income, i.e. 10% of however much money you have leftover out of your paycheck after paying for 'necessities' like food, rent, utilities etc. For many college grads who wind up working at 'menial' jobs, or have no job, the required payment may now actually be zero. And even for college grads who land a $40k per year job after graduation, the required payment may only be a couple of hundred bucks.
- Despite the outstanding balances of many student loans now continuing to grow larger every month ... because the required monthly payment won't even cover the interest charges ... in the final analysis it no longer matters. No matter how large the outstanding student loan balance grows to be 20 years from now, it will be totally forgiven by the gov't. And if the person winds up landing a job with a gov't agency, the outstanding balance will be forgiven after 10 years.
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