Is It a Good Idea to Take out Student Loans?

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Not all students are taking out student loans, but most students are benefiting from them. When thinking about your future, consider what other students are doing.

Among the Class of 2018, 69% of college students took out student loans and graduated with an average debt of $ 29,800, which includes both private and federal debt. Meanwhile, 14% of his parents took out an average of $ 35,600 in federal loans.

Americans owe more than $ 1.56 trillion in student loan debt, spread over approximately 45 million borrowers. That’s roughly $ 521 billion more than total US credit card debt.

11.5% of student loans are 90 days or more past due.

Average monthly payment on student loans (among those not in deferral): $ 393.

What makes the statistics even more alarming is that only about 15 percent of student debt is private debt. Most of the money loaned by the students was taken from Uncle Sam’s deep pockets.

But it gets even worse.

According to the Final Audit Report of the Office of the Inspector General of the US Department of Education, “Federal Student Aid: Additional Measures Needed to Mitigate Risk of Administrator Non-Compliance with Requirements for Provision of Federal Student Loan Services », Federal Student Aid (AFE), The agency within the Department of Education responsible for servicing all federal student loans, has not been doing a good job:

The AFE had not established policies and procedures that provided reasonable assurance that the risk of default by the servicer with the requirements for servicing student loans at the federal level would be mitigated.

AFE’s oversight activities regularly identified instances of service providers failing to service government-held student loans in accordance with federal requirements.

AFE management rarely used the liability provisions of available contracts to hold administrators liable for cases of non-compliance.

The AFE did not provide administrators an incentive to take steps to mitigate the risk of continued administrator non-compliance that could harm students.

AFE employees did not always follow the policy when evaluating the quality of the servicer’s representatives’ interactions with borrowers.

The AFE administration did not have reasonable assurance that servicers were complying with federal loan servicing requirements when handling borrower inquiries, borrowers may not have been protected from substandard services, and taxpayers may not have been protected of improper payments.

Naturally, the FSA “strongly disagreed with the overall finding that it did not establish policies and procedures that would provide reasonable assurance that the risk of administrator non-compliance with federal requirements was mitigated.”

“It’s hard to see this as something that’s not completely damning,” says Seth Frotman, the student loan ombudsman for the Office of Consumer Financial Protection (OPFC) who is now executive director of the Student Borrower Protection Center. “This is the most damaging in a long line of investigations, audits and reports showing that the Department of Education is asleep on the switch, when it is responsible for more than a trillion dollars of student loan debt.”

Frotman resigned last August after issuing a scathing letter accusing Mick Mulvaney (acting director of the OPFC at the time) and the Trump administration of undermining the agency and its ability to protect student borrowers. “Unfortunately, under his leadership, the Bureau has abandoned the very consumers that Congress is tasked with protecting,” he said. “Instead, he has used the Office to satisfy the wishes of America’s most powerful finance companies.”

It goes without saying that the federal student loan program is a mess, and millions of its loan recipients are in debt. So stuck, in fact, that, according to two recent studies,

40% of borrowers can default on their student loans by 2023
250,000 borrowers default on their federal student loans each quarter
It takes 19.4 years, on average, to pay off student loans
And it should be noted that, unlike other forms of federal debt, which are disposable in bankruptcy, student loan debt generally cannot be liquidated in bankruptcy.

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