10 Reasons Why America Should Come Out With Student Debt

1.) Bigger than Most Countries
Currently, 39 million Americans hold student debt. The population with student loans is actually greater than the entire population of Canada, Poland, North Korea, Australia and more than 200 other countries. It’s also about four times greater than the population of Sweden.

2.) Average Student Debt Increases While Wages Decrease
Since 1999, student debt has increased more than 500%. Unfortunately, average salaries for young people have not. In fact, since 2000, the average salary for young people has decreased by 10%. It’s no wonder that we are seeing millennials delaying starting families, making car purchases and buying homes.

3.) Seven Million Defaulted
Out of the nearly 40 million borrowers, about 7 million have defaulted on these student debts. Translation: 7 million (or about 2 percent of the population of the United States) have had their credit trashed as a result of their student loans and can have 25% in penalties added onto their total student loan debts. To add insult to injury, about 60% of employers run credit checks on applicants before hiring or promoting, making it close to impossible for millions to get a higher paying job to actually repay these debts.

4.) Your Student Loans Could Make You Unemployable
With seven million Americans defaulting on their student loans, this also means that seven million Americans will have their personal credit plummet and be deemed unhireable by many employers as a result. Once a borrower has defaulted on a student loan, this can also result in automatically becoming ineligible for some government jobs.

Think it just ends with your credit? Think again. Don’t expect your alma mater to release your official transcripts to potential employers wanting to verify your education. The Department of Education actually encourages schools to withhold transcripts of those that are behind on payments. With many different jobs requiring official transcripts, it certainly makes it harder to get a higher paying job and to pay off student debt when your alma mater is holding them hostage.

5.) Lose Your License
Yep, you read that right. So, even if you aren’t looking for a job, you can lose the one you currently have. If you default on your student loans, you can be stripped of your professional license and in one state, even have your driver’s license suspended as punishment. In 2011, 42 nurses in Tennessee had their nursing licenses suspended for defaulting on their student loans. In Montana, though the default rate is low, 617 people from 2009-2012 are currently in default, and can have their driver’s license suspended by the Montana Department of Justice.

6.) Families Have Inherited Student Debt of Deceased Loved Ones
It doesn’t always end when a borrower dies. Though student borrowers with federal student loans no longer have to worry about this, private student loans can be transferred to family members once the borrower is deceased. One example of this involves the Bryski family. In 2004, Christopher Bryski suffered a traumatic brain injury and later passed away. After his death, his private student loans were then transferred to his family. The Bryski family has since worked with legislators to continue to introduce and re-introduce legislation that would prevent this from happening to other families. Most recently, HR 2961: The Student Loan Protection Act of 2013, AKA, “Christopher’s Law.” If passed, Christopher’s Law would help families like that of Angela Smith. In 2008, Angela’s son, Donte was killed, yet his student debt lives on.

7.) Delaying Starting Families and Major Purchases
According a report by Young Invincibles, since 2002, the debt-to-income ratio of an average single student debtor has increased from .43 to .49 today. This has resulted in many more people being disqualified for first-time home mortgages. To further back this up, the National Association of Realtors has also cited student loan debt as a reason for a decline in housing purchases among first-time buyers. It doesn’t stop there either. Student loan debt has also been cited as a major reason why millennials have delayed car purchases and even starting families.

8.) Interest Rates Can Only Go Up
Some bipartisan deal. Recently, Congress briefly allowed interest rates of undergraduate federal student loans to double from 3.4% to 6.8%. This didn’t last long. However, the new deal isn’t that much better. Now, student loans will have variable interest rates which can only go up. As the economy improves, the interest rates will rise as well and could eclipse 6.8% by 2015.

9.) No Bankruptcy Protection for Student Loans
Unable to pay its debts, last month, Detroit filed for bankruptcy, joining Harrisburg, PA and Stockton, CA. Unfortunately, if Americans with student loan debt find themselves in a similar position as one of these big cities, it is nearly impossible to file for bankruptcy. In fact, debts from gambling and other consumer debts can be erased, but not education debt. These debts can continue to grow when a borrower is unable to pay, and can even follow a borrower to the grave. Removing bankruptcy protection from student loans has only benefited the lenders. In a leaked memo, Sallie Mae officials have listed preserving the inability to discharge education debt in bankruptcy as their second most important goal.

10.) Government Profiting Off Student Loans
If the Federal Government were a private company, it would be the most profitable company in the world. The Congressional Budget Office projects that the Federal Government will make about $50 BILLION on student loans this year alone. This is $5 billion more than ExxonMobile (the most profitable company in 2012) made last year.

By: Kyle McCarthy

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