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Tuesday, August 07, 2012

Consumer Credit & Granny's Student Loans

A helpful, if mildly sadistic, Anon left us this link in the comments below:
According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. ...

Many of these retirees aren't even in hock for their own educations. Consumer advocates say that in the majority of the cases they've seen, the borrowers went into debt later in life to help defray education costs for their children or other dependents. 
Never cosign for someone else's student loan. If they can't pay, you have to, and you can't get rid of the debt. Yes, they will take it out of you Social Security. For that matter, older people should think very hard about taking out any student loans. The chance of gaining enough income to pay it back lessens as you age. 

I dropped in to post about today's Consumer Credit report for June . I was awed to find that virtually the entire increase came from - you guessed it - student loans. Revolving (CC) credit dropped (0.1 billion) because consumers are still trying to make up for the earlier binge, I suppose. Anyway, those who can pay off are paying off. 

Non-revolving credit rose by 6.3 billion. But almost all of the increase, net, showed up in debt owed to the federal government (5.8 billion). Non-revolving credit at banks and CUs dropped. Non-revolving credit rose fractionally at finance companies and in pools of securitized assets, which may be either student loans or auto loans, but should be mostly auto loans. 

So this is what our economy has come down to, and I don't want to read any more chirpy articles about retail sales.

Here's a cheery thought.

May 31, 2012
College enrollment shows signs of slowing

We are seeing early signs of long-lasting trouble.

Did I say cheery? I meant dreary. Sorry about that! Sigh.

P.S. I propose that the word verification should move to a "Guess the Random Number" model. I think I'd probably do about as well, lol.
This story confirms that Barack Obama is a banker.

Please join my Debt Neutrality Crusade.

Debt Neutrality would enable consumers to pay down their debts interest free as long as they don't
run up new debt of equal or greater amounts.
Of all the bubbles, higher ed is the cruelest. Selling kids false hope of a "career" in video game design or poly sci, financed with non-dischargeable loans. Of course, the folks driving these costs are compassionate, caring education professionals getting 6 figure incomes to teach 1 class a semester. I pray for this one to pop, and soon.
With some luck, I should have mine paid off before I hit retirement. (Try as hard as I might, I can't see doing tech support in my 70s!) You will see more of this because folks laid off during the tech bust and the current downturn were encouraged to go back to school. The jobs out there aren't enough to pay down a big student loan. I'm glad mine was for community college.
Anon - it's strange, but true. The bad economy is driving the higher education bubble, and then the overhang of debt the kids have is driving the bad economy.
Teri - I think we all know that retirees working into their 70s to pay back student loan/mortgage debt is not a good plan.

But then, recovering student loan debt by clipping SS benefits isn't either.
I guess so, Pres. Obama is a banker.
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