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The Federal Student Loan Program - Yet Another Growing Threat to the Nation's Solvency

Outstanding Federal Student Loan Debt Soars to $956 Billion, Default Rate Escalates to 11%

Many individuals are aware that the Medicare, Medicaid and Social Security programs will run out of money sooner rather than later if significant action is not taken to bolster them and assure their survival. I wonder how many know of another less obvious front on which federal government insolvency looms, that of the student loan program.

It is stunning to recognize that according to the nation's leading financial newspaper, that in the third quarter, student loan debt rose $42 billion to $956 billion (a 56% increase since 2007), the federal government is the holder of 93% of the loans, and that payments on 11% of the loans are delinquent by ninety days or more, an increase from 8.9% in June.

Let the record reflect that President Obama championed loans that are easy to obtain, and that Education Secretary Arne Duncan echoed that loans should be available to as many people as possible.

More than three quarters of federal student loans are "Stafford loans," which require no credit check, no assurance that the individual receiving the money will be able to repay their indebtedness.

The federal student loan program places a noose not only around the necks of taxpayers, but around students and their families, who are being encouraged to go to school "on the government" without considering the ramifications of what they are undertaking. The many that are unable to repay their obligation receive a rude awakening when they find that their debt is not dischargeable in bankruptcy (a factor which some liberal members of Congress are seeking to change), that it will remain with them for the rest of their lives and put a huge crimp in their standards of living for years, if not for life.

The federal student loan program is one additional significant challenge that the nation will face, illustrating the law of unintended consequences. 

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Jason Bahr December 01, 2012 at 04:43 AM
Our debt problems never end - when the Gov't tries to help, a bigger mess is created. These kids coming out of school not only have huge debts, they can't find a job to pay back the loans. This country's Greatest Generation's great grandchildren will be referred to as the "Lost Generation." As the story goes - short sleeves to short sleeves in 3 generations. Never thought it would happen here, but welcome to America, version 2013.
M L spazok December 02, 2012 at 02:43 PM
the decision lies with the parents. why not a comm college for 2 years or comm coll courses over summer break? 4 year colleges welcome incoming, new juniors to fill gaps of exits. there is no reason for student debt. only buy what you can afford. if your priorities are designer bags, shoes, attire, electronics then so be it. but those funds can be used for a higher purpose. the attitude of "self serving, self center" needs to be re-addressed and priorities assigned. If it continues, be prepared to suffer economic consequences.

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