Nelson may be right. She pays about $145 a month, but her loans are now about $66,000. With a 6 percent interest rate, even if she more than doubles her payment to $331, it will take her 98 years to pay it off, and she’ll pay more than $300,000 in interest. If she could boost that payment to $700 a month, she could get it paid off in the next 10 years, and be finished by retirement. Darren Marshall should be thinking about his retirement.
They come as concern continues to mount about the level of indebtedness by college students and graduates. Estimates show more than $1.2 trillion in student loan debt across the nation, more than the nation owes on credit cards. Congress is expected to take a look at the issue in the coming months. In September, the Senate Health, Education, Labor and Pension Committee launched a series of hearings to look at critical issues in higher education ahead of reauthorization of the Higher Education Act, which is set to expire at the end of this year. Among the issues being looked at are the student loans programs, according to Allison Preiss, press secretary for Democratic Sen. Tom Harkin of Iowa, who heads the committee.
In 2012, approximately 900,000 Swedish students received help from their government totaling close to 22 billion krona , or nearly $3.5 billion, to cover fees and living expenses, according to annual reports. Roughly two-thirds of those funds were loans. [See photos of the top universities around the world .] In Japan, an estimated $5 billion in student loans were past due in 2011, the Japan Daily Press reported . Average tuition at the country’s public universities is roughly $5,400, according to Japan’s Ministry of Education, Culture, Sports, Science and Technology. The unpaid debt prompted a crackdown on poorly performing direct loans forgiveness students.
The head of the National Union of Students (NUS) has slammed the move as “ridiculous” and “extremely concerning”, while the government insists the sale represents “good value for money”. Selling Off the Loan Book Would Be the Government’s Most Outrageous Attack on Students, So Why Aren’t the NUS More Concerned? A company called Erudio Student Loans was named as the successful bidder on Monday, and now owns the remaining 17% of mortgage style student loans taken out by those who began courses between the eight year period. Universities and Science Minister David Willetts said the price paid exceeds the estimated value of the remaining student loans, and added the private sector is “best placed” to collect the remaining debts. The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by 160m,” he said. “The private sector is well placed to maximise returns from the book which has a deteriorating value.
The loans, which were taken out by students who began courses between 1990 and 1998, have been sold to a debt management consortium for 160 million. Universities Minister David Willetts said the private sector was best placed to collect the outstanding debt, allowing the Student Loans Company (SLC) to concentrate on administering newer loans. Of the 250,000 loans sold, around 46% are earning below the repayment threshold, 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms. The project to find a buyer for the remaining mortgage-style loans was launched earlier this year, when Mr Willetts said the plan would “maximise the value of one of the Government’s assets”. The mortgage-style loans have a face value of around 890 million but the market value is significantly lower. The SLC will continue to manage the loan book until it is transferred to Erudio Student Loans in a few months’ time.
Typically debt purchase firms pay just a few pence in the pound for these dodgy debts and then carpet bomb potential debtors. In the past that has led to many complaints about innocent people receiving threatening letters, phone calls or even visits simply because they have the same number as a debtor, or used to live at the same address as them. As the debt purchase firms own the debts, they only make money if they can collect on them, so some tend use whatever methods at their disposal to do so. However the industry has come under the scrutiny of the Office of Fair Trading and responsibility for its regulation will in April pass to the Financial Conduct Authority. Most debt purchase firms took an enormous hit in the credit crunch when they were left saddled with too much uncollectable debt.
Investment bankers from Barclays and Rothschild were appointed by the Department for Business, Innovation and Skills (BIS) last month to oversee the sale, which more than 15,000 people have signed an online petition to oppose. Danny Alexander, the chief secretary to the Treasury, said during the summer that the Government hoped to raise 10bn from the sale of corporate and financial assets such as the student loan book by 2020. David Willetts said the sale would help balance the nation’s books Speaking in March, when the mortgage-style student loan auction was initiated, David Willetts, the universities and science minister, said: “Selling the remaining mortgage-style student loans will allow us to reduce public debt and maximise the value of one of the Government’s assets. “The private sector’s expertise makes it well-placed to collect this debt and the sale will also help the Student Loans Company (SLC) to concentrate on providing loans to current students.” The low recovery rate on the 1990s loans means the sale price is likely to be only in the tens of millions of pounds, reflecting the distressed nature of the debts, people close to the situation said on Sunday. The deal will come at a sensitive time, just weeks after Royal Mail was floated with a valuation of 3.3bn. On Wednesday, Royal Mail will present its maiden results as a listed company, while Vince Cable, the Business Secretary, will make a further appearance before the BIS Select Committee amid allegations that the postal operator was sold too cheaply.
Are student loans the next big bust?
The loans, which were taken out between 1990 and 1998, are likely to be sold for significantly lower than their market rate. Universities Minister David Willetts announced plans to sell the loans in March, saying the “mortgage-style” student loans will “allow us to reduce public debt and maximise the value of one of the government’s assets. A fresher at Manchester university browses books at a secondhand stall. Student loans from 1990 to 1998 will be sold to a private debt collection agency on Monday “The private sector’s expertise makes it well placed to collect this debt and the sale will also help the Student Loans Company to concentrate on providing loans to current students.” Many whose loans will be included in the sell-off took to Twitter on Sunday evening to voice concern about the plans to sell the loans to a debt collection agency. I wish there was a way I could stop them selling off the student loan book, it’s lunacy.
Louis. Chopra draws lots of parallels between the mortgage bubble and student loans today. In both cases, those making the loans and pocketing the money have little interest in seeing it repaid. Posh U arranges a federal student loan and gets the money, but its not on the hook of Joe Student goes broke. Hence the bath of advertising from for-profit colleges on daytime TV, hoping to reel in the idle.