And You Thought Credit Cards Were Bad?

seboldadminEconomic Insights

In an effort to make college more affordable, the Federal Government first made it easier to get a loan. This program has been so incredibly popular, that we now have amassed over $1.2 trillion in student loan debt. Now that we have all these educated students, they should be that much smarter that they have higher incomes to pay back their student loan debt, right? Well, let’s not jump that fast. The crippling debt on our workers in waiting apparently is just too much for our newly educated crowd. The government has now instituted a new payback program that is not based on interest rates, or time frames, but the income of the borrower. So Johnny, you don’t need to get a good job to pay your student loan payment, you only need to pay a portion of your income to your loans.

As the chart below suggests, a greater portion of all student loans are now in income driven repayment status. These graduates have now entered the endangered servitude portion of their life. After all, paying the minimum payment on a credit will only take 40 years to pay it off, without any additional expenses. This story is not going to have a happy ending.


August 3, 2015