No one is immune from bankruptcy. That's the message of a national survey released today by a South-Portland-based financial nonprofit. High-earners and college graduates are among the fastest-growing group of debtors filing for bankruptcy, according to the Institute for Financial Literacy. Bankrupty filing rates for people making $60,000-plus increased by more than 66 percent; college graduates by 20 percent. -- Maine Public Broadcasting report
Since "get a college education" is so often prescribed as the cure-all for all our ills, the warning photo to the left is apt -- the higher ed bubble is showing all the same signs as the housing bubble did in its last, frantic moments. Here's a good example of how cut-throat the student loan business (and it IS very much a business) has become. Colleges are holding transcripts hostage, which makes it difficult for the borrowers to get the job they need to pay the loans:
This is happening at a time when recent grads are finding it particularly hard to find work, not just in their chosen fields, but anywhere. About half of recent college degree-holders were unemployed or underemployed last year, according to a recent Associated Press study. And the federal Consumer Financial Protection Bureau estimates student loan debt has passed $1 trillion, an amount greater than all outstanding credit card debt. The Department of Education put the default rate at 8.8 percent of student borrowers as of September 2010.
It's no accident that colleges are using the withholding of official transcripts to punish students behind in their loan payments. It turns out the federal government encourages the practice. Schools are not required by law to withhold transcripts, but a spokeswoman at the Department of Education confirmed that the department "encourages" them to use the draconian tactic, saying that the policy "has resulted in numerous loan repayments."
It is a strange position for colleges to take, however, because the schools themselves are not owed any money. Student loan funds come from private banks or the federal government. For federal Perkins loans, schools get a pool of federal money to apply to students' financial aid, and if students don't pay, that pool gets smaller. But the creditor is still the government, not the college. And in the case of so-called Stafford loans, schools are not on the hook in any way; they are simply acting as collection agencies, and in fact may get paid for their efforts at collection.
Since "get a college education" is so often prescribed as the cure-all for all our ills, the warning photo to the left is apt -- the higher ed bubble is showing all the same signs as the housing bubble did in its last, frantic moments. Here's a good example of how cut-throat the student loan business (and it IS very much a business) has become. Colleges are holding transcripts hostage, which makes it difficult for the borrowers to get the job they need to pay the loans:
This is happening at a time when recent grads are finding it particularly hard to find work, not just in their chosen fields, but anywhere. About half of recent college degree-holders were unemployed or underemployed last year, according to a recent Associated Press study. And the federal Consumer Financial Protection Bureau estimates student loan debt has passed $1 trillion, an amount greater than all outstanding credit card debt. The Department of Education put the default rate at 8.8 percent of student borrowers as of September 2010.
It's no accident that colleges are using the withholding of official transcripts to punish students behind in their loan payments. It turns out the federal government encourages the practice. Schools are not required by law to withhold transcripts, but a spokeswoman at the Department of Education confirmed that the department "encourages" them to use the draconian tactic, saying that the policy "has resulted in numerous loan repayments."
It is a strange position for colleges to take, however, because the schools themselves are not owed any money. Student loan funds come from private banks or the federal government. For federal Perkins loans, schools get a pool of federal money to apply to students' financial aid, and if students don't pay, that pool gets smaller. But the creditor is still the government, not the college. And in the case of so-called Stafford loans, schools are not on the hook in any way; they are simply acting as collection agencies, and in fact may get paid for their efforts at collection.
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