The debt on student loans in the United States has reached $830 billion, surpassing debt owed by consumers on their credit cards.
Revolving credit debit, most of which is carried on credit cards is currently hovering at $826.5 billion, according to the Federal Reserve. For most Americans that should come as a surprise, because at the height of the financial collapse in the third quarter of 2008, the Fed announced revolving credit debt at $975.4 billion.
Credit card balances have gotten incrementally smaller since that time with widespread advertisements and warnings in all manner of media about the perils of amassing huge card balances.
People have been encouraged to pay down expensive debt that comes along with high interest payments and many consumers have followed that advice. Banks have cut off credit to those deemed unworthy and lower credit limits have been imposed on others.
Much less has been written and spoken about the cost of debt on student loans, its precarious rise to the new historic level and the consequences of defaulting on it.
Student Loan Debt, Unlike Credit Card Balances Isn't Relieved in Bankruptcy
Unlike money owed on consumer credit accounts, most if not all student loan debt cannot be eliminated by a bankruptcy proceeding. When government loans go into collection, a hefty fee is added to the balance that can be as high as 10% of the outstanding balance.
With the cost of college rising every year, students who go though a graduate or professional school program, in addition to a four-year university can be saddled with hundreds of thousands in debt prior to testing the job market.
A story in a recent edition of the Wall Street Journal carried the harrowing tale of a young woman whose debt, after medical school reached more than $500,000. After she exhausted the limit of federal loan money she received aid from private loans with a bank as well as Sallie Mae.
The collection problems began soon enough and agency calls became a regular part of her life as, well as her father's because he had co-signed for his daughter.
Sallie Mae went so far as to contact a neighbor when it didn't get the right response from the debtors.The WSJ story made it clear that Sallie Mae has the right to inquire from a neighbor if the address it has for the debtor is correct.
There has been some indication from various sources that parents are rethinking the automatic decision to insist their children get a degree from prestigious universities and colleges. Some are wondering if a degree is worth it in the long run if the amount owed could take a couple of decades to be paid in full.
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