• Percentage of high income students with student loans has doubled in last twenty years (Consumerist):

• What’s the right way to borrow for college?  Kiplingers weighs in:

To avoid overborrowing, students should aim to keep total debt to no more than their anticipated starting salary after graduation, says Mark Kantrowitz, senior vice-president and publisher of Edvisors.com. You can go to www.payscale.com  to see salaries in specific fields; use the figures as a guide for borrowing. For example, a civil engineering student can expect an annual starting salary of about $54,000, according to PayScale.com. Graduates in that field should be able to manage more debt than, say, an elementary education major, who can anticipate earning about $32,000 during the first year of teaching. (If your child doesn’t have a career path in mind, Carol Stack and Ruth Vedvik, authors of The Financial Aid Handbook (Career Press), recommend limiting borrowing to $32,000 total, the majority of which can come from federal loans.)

• Student loans crowding out mortgages for 20-29 year olds (Marketplace):

On average, a twentysomething today has about $25,000 in student loan debt. That is up about $10,000 from 2005. Older borrowers are also carrying more student loan debt, in part because they co-signed loans with kids and grandkids.

Mortgages are down, as a percentage of young American’s debt. “If you were to look at that as a graphic, a bar chart, you would essentially see that the decline in mortgages is almost exactly matched by the increase in the student loan piece,” Wise explains.

• More evidence that student loans are impacting the housing market (USA Today):

Home builder adviser John Burns Consulting published details from a study earlier this month concluding that student loan payments will cost the housing industry 414,000 transactions this year that would have totaled $83 billion in sales.

• What happens if you default on your federal student loan?  The list of bad consequences is long as this Lifehacker article lays out:

With many young graduates carrying anywhere from thousands to hundreds of thousands of dollars in student loan debt, students are currently facing a mountain of a financial challenge. On top of already high numbers, student loan debt is a sticky kind of debt, as in it stays with the borrower or cosigner no matter what.

• Are student loans financial aid?  This Salon article says “No.”

Student loans are an economic transaction, the same as if the government had contracted out to build a bridge or hired a person to serve in the military or police force or be a teacher. The money spent here isn’t “aid.” Hiring someone to build a bridge exchanges labor for cash. Student loans exchange cash now for cash later plus interest. Those student loans would be underprovided without the government, certainly, but in the same way that bridges and law enforcement and other goods would also be underprovided if they weren’t done by government.

• What happens when you mix student loans with financial literacy?  People paying off their student loans into their 70s (Washington Post):

It’s hard not to feel that there’s something wrong when the government takes $50 each month from a 72-year-old retiree’s Social Security check to help pay off a student loan she took out 40 years ago.  Yet, that’s what I thought as I watched a recent congressional hearing about the student loan problems facing many elderly Americans.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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