Students Finding Out What It Means to Be Underwater
August 29, 2012
The U.S. economy faces a number of challenges, such as millions of houses that are "underwater," or worth less than the outstanding mortgage balances. Further hindering economic prospects is the massive amount of student loans weighing down millions of Americans. "The growing student loan debt crisis (is seen by many) as the next potential threat to our country's financial stability," Illinois Attorney General Lisa Madigan said at a recent congressional field forum. "Students enrolled in colleges here in Chicago and across Illinois are on track to become part of a generation burdened by debilitating debt, limited career prospects, and therefore long-term financial insecurity." Some private student loans do not boast the current low interest rates and cannot be discharged through bankruptcy. Rohit Chopra, the Consumer Financial Protection Bureau's student loan ombudsman, pointed out that college is still considered a good investment for most Americans; but borrowers who are underwater on their student loans are experiencing an unprecedented drop in standard of living for college graduates. According to the Census Bureau, the number of Americans aged 25 to 34 who are living with their parents has spiked, while the rate of homeownership has dropped for those between the ages of 25 and 29. The current troubles with student loans could cut into demand for mortgage credit. A recent analysis of Fed data by the Wall Street Journal found that the greatest student-loan impact has been on families with annual incomes between about $95,000 and $205,000; this income bracket owed an average of $32,869 in college loans in 2010, up from $26,639 in 2007 after being adjusted for inflation.
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