The $555,000 student-loan debt


Once again, it takes the WSJ to illuminate the issue here of student debt. Just think of it…one of America’s 2nd tier ‘best and brightest’ with over a half a million dollars of debt just from going to college:

It started with innocently enough[dripping sarcasm]:

When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000.

But then, life happen instead of idealistic positive thinking projections:

Since then, it has ballooned to $555,000.

Get help digging yourself out of debt
It is the result of loan payment deferrals that Bisutti got while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

Still think it is a good idea that the government is involved, deeply involved, with student debt. But it isn’t only the problem of making college so much more expensive…

Now that the Federal Government has a monopoly on student debt, do you think it going to get easier? Interesting that as the government has gotten MORE involved, it has gotten tougher to default. And much tougher, of course, than other debt:

Unlike other kinds of debt, student loans can be particularly hard to wriggle out of. Homeowners who can’t make their mortgage payments can hand over the keys to their house to their lender.

Credit card and even gambling debts can be discharged in bankruptcy. But ditching a student loan is virtually impossible, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principals waived seldom happens.

Of course, there is much student loan debt, right?

Yet many former students are trying. There is an estimated $730 billion in outstanding federal and private student-loan debt, says Mark Kantrowitz of FinAid, a Web site that tracks financial-aid issues — and only 40% of that debt is actively being repaid. The rest is in default, or in deferment, which means payments and interest are halted, or in forbearance, which means payments are stopped while interest accrues.

So…we have created a system, a whole economy, where our educated have high debt. Just one question? Who is going to be buying houses if our well educated come out unable to purchase houses? Hmmm?

And like a good Blake Edwards movie, the joke after the joke after the joke: Tomorrow the U.S. Department of Education will propose a measure to penalize for-profit career colleges for graduating students with high debt-to-income ratios.

I guess a half a million dollars isn’t enough to warrant an investigation.

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