Federal Student Loans Are Choking People

    July 7, 2014
    Mike Tuttle
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Here is a startling statistic that you may not be aware of. Outstanding student loans have surpassed credit card debt in this country. They stand at $1 Trillion. The Federal Reserve has determined that this level of debt keeps borrowers from buying homes, saving for retirement, and engaging in consumption that helps drive a healthy economy.

Senator Elizabeth Warren argues that the Federal government is using student loans as a money-maker. This year, the federal government will make $34 billion on student loans. The government even makes money on its loans to low-income students – 36 cents, on average, for every student loan dollar it puts out.

The average student leaves college $29,000 in debt after earning a bachelor’s degree. Then they head out to work at entry-level positions and have to jump right in to paying those loans, right when they should be focusing on starting homes, careers, and businesses.

Warren has argued that the government should loan money to students at the same rate that it loans to banks, less then 1%. Her bill to forgive student loan chunks and allow for lower interest rates has stalled in the Senate. But proponents vow to keep fighting for it.

In the meantime, others look for alternatives to help pull their debts down lower. One common alternative is refinancing and consolidation of loans. Students commonly have more than one loan, or perhaps multiple loans in a household. Consolidating those loans through a private lending institution at a lower rate is an attractive offer for some.

Brendon McQueen, the founder of student loan debt management app Tuition.io explains, “On the federal consolidation side, they take a blended average of your existing interest rates and fold them up into a single federal loan. In certain instances, if you have a loan with an incredibly low interest rate, you may not choose to include that loan in your consolidation package because it would affect the interest.”

In other words, treat this debt like any other. Look for better interest opportunities and take them when you can find them.

Whether an answer comes from legislative channels or through market possibilities, everyone agrees that student loans are strangling people just as they come out of higher education and try to take their place in society.

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    the goverment should be invest in the future instead of leaving colleges grads to pay sum of 30 grand or more so, find ways to reduce the interest rate of you will have less students attending college.

  • imonfiredammit


  • Nayr

    It’s a win-win situation for Congress. They can charge absolutely anything they want, since federal student loans are the only game in town for the overwhelming majority of students, and there is the added bonus of being able to say they kept their campaign promises not to raise taxes.

  • Luke Schneider

    And our gobberments have collectively hocked a third of the capital assets of the US by amassing $35T in public debt in our names. A $1T school loan crisis pales by comparison. Which debt do you think has more effect on real US GDP growth? I certainly don’t need no schoolin’ to figure that one out, which is good since the gobbermint didn’t gimme none.

  • Gary Orum

    They(Feds) let the Bankers take a walk on the sub-prime fiasco, now in collusion with schools, both public and private, SallieMae and private lenders they(Feds) have screwed a generation of this country and their parents. Hell, 35 yrs ago my wife got a Pell grant, worked part time and I worked full time, paying for her college was no problem…..can’t do that do that today.

  • Chance

    I have a Master’s, work two part time jobs because that’s all I can get. No insurance, no retirement, nothing left to pay student loans and even though they are being deferred due to income, the interest is $5,000 a year added on. I got out of undergrad with $11,000 in debt, was convinced by advisors that BA’s didn’t matter anymore and to go to grad school. I worked 2 jobs all through school and still came out with $60,000 in debt. That was 5 years ago. I pay $100 a month when I can but now I owe $80,000 because of interest. By the time I get a good enough job to pay, it will be $100,000 at least. I no longer have any illusion of buying a house, a new car, or ever being able to retire. I would be better off if I had worked in fast food out of high school. A friend that did that and now has a management position just bought a house, has never had to use government aid and has a family. Lord help me if I get a disease that requires medical treatment. I’d kill myself but then my parents would have to pay it.