Student loans next big bailout

The job market is anemic and college graduates cannot find work. To make matters worse, according to Fox News, there are currently $1.11 trillion in student loans outstanding and $121 billion of them are 90-plus days delinquent or in default. Experts now suggest what many of us have known for years, we should expect the government to push for a taxpayer bailout of the government-subsidized student loans program.

Student loans bailout similar to mortgage bailout

There seems to be a trend when the government gets involved in making student loans…just wait and there will eventually be an implosion. We saw this same issue rear its ugly head in 2007 and 2008 when the housing market had a major meltdown.

Unfortunately, with student loans the issues are the same. In the mortgage industry loans became too east to get, spurred by government incentives and subsidies from mortgage lenders Fannie Mae and Freddie Mac. A housing bubble was created and too many borrowers found they had borrowed money they could never repay. We, the taxpayer, were then forced to step in and save the struggling homeowners.

Easy access to college loans has created the same problems. With easy access to government student loans and more students applying to college, colleges have had no incentive to keep prices low or competitive. Tuition was inflated, but students didn’t care, they simply kept borrowing more money through student loans with little regard for how it would eventually have to be repaid.

Obama administration increases loan repayment programs

Now it is not unusual for students to exit college with $30,000 to $100,000 in school loan debts with no ability to repay the loans. According to a report by Fox News, “the Obama Administration has already created a series of small-scale taxpayer-financed bailouts but these types of programs are expected to increase over time.”

Unfortunately, the job market has exacerbated the issue. According to reports the “share of 25-year-old Americans with student debt increased to 43% in 2012 from 25% in 2003, and the average loan balance rose 91%, to $20,326 from $10,649, New York Fed data show.”

Student loan debt has also increased despite tightening in other loan markets. After the housing crash and Great Recession it has become more difficult to borrow money to purchase houses and cars. It is even tough to get credit cards. Not student loans. In fact, in some cases the federal government does not even verify a debtor’s credit worthiness or bar them from borrowing if they have previously declared bankruptcy.

How bad is the problem?

Students have borrowed money they cannot repay. They cannot find work and they cannot pay back their loans. It’s estimated the current student loan programs could end up costing taxpayers $88 billion over the next 10 years. It could cost even more if the federal government fails to increase their efforts to recoup delinquent loan payments.

While democrats suggest simply increasing taxes on the rich to make up the deficit, others claim the federal government should get out of the loan business, make access to money more difficult and force colleges to lower their costs and offer affordable programs, much like they did in the 1980’s and 1990’s.

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Beth

Beth L. has been a contributing writer to websites since 2008. She has a background in Business Management and Management Information Systems and graduated from the University of Texas in 1996. Now she specializes in content development for legal entities for issues regarding bankruptcy, personal injury and Social Security Disability law.
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About Beth

Beth L. has been a contributing writer to websites since 2008. She has a background in Business Management and Management Information Systems and graduated from the University of Texas in 1996. Now she specializes in content development for legal entities for issues regarding bankruptcy, personal injury and Social Security Disability law.