That is a frightening headline. What makes it frightening is right now, according to the Government Accountability Office, over 330,000 student loans have not had a payment in over a year. Another 180,000 are more than a month delinquent.
Yes, in the name of pursuing higher education for their children, hundreds of thousands of parents have co-signed loans for their kid’s education. In the process, many have delayed retirement, put off health expenses and lost portions of Social Security checks and tax refunds to their lender, the federal government. Yes, right now many seniors on Social Security are beginning to see their Social Security garnished to collect on defaulted student loans of their children. What else can Uncle Sam do to make sure he gets his money back? He can take tax refunds to reduce the debt owed on these student loans.
The total student loan debt is now 1.3 trillion and is still rising. Nearly four out of ten student loans are going to borrowers with credit ratings lower than subprime. Eight million federal student loans, totaling over $137 billion are in default by more than a year. In contrast, during the housing crisis, the percentage was only 20 percent.
What does all this information mean? Notice I did not say bad news, it is just news. What makes it bad or good is whether you are prepared for it and it will hurt or help you. If you do not have a student loan, but have money set aside, does this information cause you to think it would be best to protect what money you have from the ever further reach of the tax man?
If you do have student debt, is there a way out for you?
Regardless of which you are, we believe there is a way for this information to help you by using the power of certainty and leverage. Yes certainly. Rarely, if ever, will you hear financial gurus talk about certainty, but that is exactly what everyone needs. You can learn more here.
By Jason I. Henderson, Ph.D.
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