Majoring in Debt, Minoring in College


The Occupy Wall Street and Occupy Colleges movements are largely driven by citizens who are not able to pay off their debts. While Countrywide engaged in predatory lending that led to an enormous real estate bubble, Sallie Mae has taken a lot of heat for offering student loans to “unworthy” teenagers with unrealistic and impractical professional goals.

Student loans just came due this past November and December 2011, yet college graduates are in even more debt after earning their degrees.

Outstanding student loans are growing by approximately 5% every year and nearing an exorbitant $1 trillion, surpassing even consumer credit card debt. Salaries are decreasing and college costs — along with living and medical expenses — are rising at an annual rate of 5%.

“New Federal laws make it next to impossible for someone under 21 to get a simple credit card, yet the same people can obligate themselves to tens of thousands of dollars in student loan debt with absolutely no problem,” said President of Consumer Education, John Ulzheimer. “This, of course, makes no sense as student loan debt is arguably worse than credit card debt.”

According to a recent New Yorker piece, almost 14% of college graduates from the classes of 2006 through 2010 can’t find full-time work. Overall, 55.3% of people ages 16 to 29 have jobs — the lowest percentage since World War II. Today, one in five young adults lives below the poverty line.

If you’re one of those individuals who made the ambitious move to take out student loans, Ulzheimer has four tips to help you fight the struggle:

1. Consolidate multiple loans into one giant one.

Student loans are reported to the credit bureaus on a disbursement basis. For example, if you take out five loans to pay for college, then you’ll have five unpaid loans on your credit reports. The fewer the number of loans on your credit report, the better your credit score.

2. Make all payments in a timely fashion.

A missed payment on a student loan is just as damaging as any other loan. Just because student loans can be deferred for years, doesn’t mean due dates are optional. Just like mortgage, auto and credit card companies, student loan lenders have the same ability to report late payments and defaults to credit reporting agencies.

3. Don’t assume your loans will be written off if you’re not worthy enough to pay them back.

Student debt is not statutorily dischargeable. If your loan is guaranteed by the government, then you cannot eliminate it via a bankruptcy. Student loan debt will follow you until you pay it off — or die.

4. Don’t default on your student loans, and don’t think student loan defaults function like other credit default instruments.

The Fair Credit Reporting Act (FCRA) determines the amount of time defaulted debts can remain on your credit report. The FCRA, however, doesn’t include defaulted student loan debt. Instead, student loan credit reporting is governed by the Higher Education Act. Student loans can bleed badly. Unlike other loans, defaulting on student loans can lead to garnishment of wages, seizure of tax returns and Social Security, and the loss of eligibility for federal VA or FHA loan programs.

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