Education is the key to a better future, yes, but what happens when that “key” has strings attached to a huge boulder? I am talking about student loan debt, of course.
Look at it this way: The NY Fed reported in its August report that outstanding student loan debt is at $550 billion. It revised its figures in the second quarter, and it has shown outstanding debt to actually hit $845 billion. That’s 53.7 percent higher than the original $550 billion!
You might be thinking “so what?” Why should we even care about student loans?
Two words: domino effect.
Remember how the economy tumbled down when Lehman brothers took on too much debt from subprime mortgaging and failed to collect enough money to meet its financial obligations? One thing led to another, and we found out the hard way that an economy mired too deeply in unpaid debt can tip over into recession.
The same thing is happening all over again, but this time with student loans instead of subprime mortgaging.
And besides, student loans are one of the few types of loans that will not be erased by bankruptcy. If you must borrow money for education, then at least go for federal loans. The interest rates are better and repayment options more flexible – as long as you don’t go in over your head and pull out money you know you won’t be able to repay.