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11 surprising student loan facts

For instance, 10% of recent graduates of four-year colleges have monthly student loan payments that exceed 25% of their income.

By MSN Money Partner Jul 26, 2012 1:35PM

This post comes from Blaire Briody at partner site The Fiscal Times.


The Fiscal Times on MSN MoneyIt's been a busy time for student loan legislation. As student debt continues to skyrocket, the government has been busy tweaking eligibility requirements, interest rates, and funding for federal loans -- and many changes took effect July 1. Private student loans have also been under the microscope lately, with a number of policymakers pushing for reforms.


Image: Student in classroom (© StockByte/PictureQuest)Here are 11 recent changes and surprising facts about student loans.  


1. Grad students can no longer receive subsidized loans. One little-known provision in the Budget Control Act that was signed into law on Aug. 2, 2011, eliminated subsidized loans from the federal government for graduate and professional students. They can still receive unsubsidized federal loans, but they are responsible for the interest that accrues on the loan while they're in school. That change took place on July 1.  


2. Funding has been cut for families making between $23,000 and $32,000 a year. Another surprising change effective July 1 affects low-income families. When they fill out the Free Application for Federal Student Aid or FAFSA, families receive an Expected Family Contribution number, and typically any family with an income of $32,000 or less received a zero, which made them eligible for more aid. The income limit has now been reduced to $23,000. (Post continues below.)

3. Congress approves low student loan rates, but they may not help much. Though Congress recently prevented the low interest rate of 3.4% from doubling for new subsidized federal loans, the savings will not be substantial for borrowers. A third of fourth-year students who borrowed the maximum $5,500 would save only about $9 a month. The 3.4% rate also will not be extended to higher-rate loans issued before the 2011-12 school year.


4. A rise in defaults. About 5 million federal loan borrowers are in default (meaning they have failed to make payments for 270 days or more) and 850,000 private loans are in default. In total, this adds up to about $67 billion of defaulted student loans. To help collect payments from students who have defaulted on their federal loans, the Education Department has started hiring private debt-collection companies.


5. The perils of private student loans. The private student loan market went from less than $5 billion in 2001 to more than $20 billion in 2008 -- a 300% increase (though due to tighter credit standards and regulations today, that number has since decreased), according to a recent report (.pdf file) from the Consumer Financial Protection Bureau. Some 2.9 million students currently have private loans, owing about $150 billion total. In 2007, 70% of private loans were made to undergraduates without their school's involvement, and interest rates on private loans can range from 5% to 18%, with no limits on fees and penalties.


6. Jobless and indebted. For private loan borrowers who started school in the 2003-2004 academic year (and entered the job market in 2008 if they gradated in four years), the unemployment rate was 16% in 2009, according to the CFPB report.


7. The right to declare bankruptcy on student loans is being questioned. Last week, the CFPB sent a proposal to Congress urging it to grant private loan borrowers the right to declare bankruptcy. Though every other type of consumer debt is protected by bankruptcy laws, Congress banned bankruptcy as a way out of student loan debt back in 1977. The CFPB proposal was strongly opposed by many conservative policymakers, who argued that this would create a hardship for private lenders.


8. Drowning in debt. Ten percent of recent graduates of four-year colleges have monthly student loan payments that exceed 25% of their income. (For a graduate making the average starting income of $41,701, that's $869 a month.)


9. Student loans are the fastest-growing category of household debt. Mortgage, credit card, and home equity debt levels have all declined since the recession.


10. It's not just the young. According to a recent report by Barclays, 15.5% of outstanding student loan balances are held by Americans ages 50 to 59, and 4.2% are held by those 60 and older. And the average remaining debt balance for borrowers over 60 is $18,250.

11. But there are some creative ideas out there on how to help. Niagara Falls, N.Y., for example, is offering $7,000 to recent graduates to help them pay off their students loans -- but only if they relocate to the declining city. An innovative new site, , will also launch this August. Set up similarly to, the site can tell you how much you need to pay each month, how to contact each lender, how much you owe each lender, and will automatically notify you when there are changes to a loan, like if it qualifies for federal consolidation.


More on The Fiscal Times and MSN Money:

Jul 27, 2012 11:55AM
IMO the term "student loan" is misleading. I know several people who used student loans for things other than actual school expenses, i. e. vehicles, spring breaks and etc., which had nothing to do with school. And the living conditions that some lived in. I visited 2 different single students at 2 different schools who were maxing out student loans and living in nice apartments The country would not be in the student loan situation if the funds could only be paid to the school and limited to state supported schools. If one needs to borrow funds to attend school than don't live beyond your means by attending a private or out of state school. The conditions that students live in today are nothing like my experiences in the early 60's in Southwest Arkansas. Small 2 man dorm room, with no air conditioning, and a community bath down the hall. Of course I had no student debt but did have part time and summer employment and attended a state school. And upon graduation go to where the work is and not where you want to go.
Aug 21, 2012 4:35PM
Sep 5, 2012 11:21PM

Here's the bottom line. Some people are just not college material. The 19 yr. old single mother of 4 who dropped out of high school her freshman year so she could concentrate on having unprotected sex is not a very good candidate for a school of higher learning. Unfortunately, she sees the commercials that dominate the morning TV (when normal people are at work) and she hears those magic words "financial aid available" and believes that this "diploma mill" will make all her dreams come true. And she pictures herself as a dog groomer with the clippers in one hand and her diploma in the other. And the next day she's at Shylock School of Culinary Arts and Dog Grooming and a marketing rep (also know as a Guidance Counselor) fills out the student loan forms for her because she can't read and before you can say who spent the money, she's got a $28,000.00 unsecured student loan. Three weeks later, she drops out of dog grooming school to pursue a new career....smoking crack with her home girls.

Guess who picks up the tab for her $28,000.00 student loan?

Sep 30, 2012 12:22PM
Don't interrupt Peter Schiff. He was right about the housing bubble and he's right about the student loan bubble. The ultra liberal, statist Diana Carew is going to end up looking really stupid on a YouTube video.
Aug 21, 2012 9:47AM
I went to a state school, lived in a dump, and worked while I went to college in the 90's. I had also saved money from a paper route and working at a fast food place while in high school. I still finished with student debt. My student loans paid for my tuition; nothing more. I paid for my living expenses and textbooks by waitressing. My first job after college only paid $45 a day with no benefits. I didn't have any opportunity to move because I had no money to travel to job interviews and a new security deposit and U-haul were way out of my budget.  One thing that troubles me, and I can't believe isn't discussed more, why aren't parents saving to send their kids to college?  Parents should start saving for college the minute they find out they're expecting.
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