Focus on Federal Student Loans

Student Loan Economists working for the Federal Reserve are trying to figure out whether student loans are making a negative impact on the US economy by limiting the sale of vehicles and residences. Student loans are counted as a deteriorating pocket of all consumer credits, with delinquency in payments having worryingly increased, while the slowly strengthening US economy permits Americans to lessen their total borrowing amounts.

According to the Federal Reserve Bank, New York, debt related to education was in excess of $1 trillion in the third quarter of 2013 and the amount of loans which were delinquent for more than 90 days increased to 11.8 percent. In contrast, the delinquency for automobile debt, credit card and mortgage have all decreased from their maximum.

Federal student aid

The US Department of Education provides low interest loans to all eligible students to assist in covering the expenses of a career school or college.  Loans both, unsubsidized and subsidized, are given to cover expenses related to higher education.

Subsidized loans are more suitable to students who require financial help. All undergraduate students are eligible for a loan. The school determines the quantum of money the student can borrow and the quantum must not exceed the financial requirements of the individual. The interest accrued on the loan is paid by the US Department of Education.

All graduate and undergraduate students are eligible for unsubsidized loans. Financial needs do not need to be demonstrated. The quantum of money which can be borrowed is determined by the student’s school and it is dependent on the expense of attendance and also other financial aids that the student receives. The student is accountable for interest related payments on the loan .

Rising levels of debt

Students are taking more and more loans to fund their college and school as expenses as higher education progresses at a much faster pace than the inflation rate. Private colleges charge about $60,000 per year. The average tuition fee during the 2013-2014 academic year was about $30,094 – a whopping increase from $18,060, from a decade ago (2003-2003). The percentage of 25 year old American students and the median balance of loans increased  by 91 percent and the balance of the average loan increased from $10,649 to $20, 326.

All US borrowers (including parents and students) owe approximately $1.2 million in debt due to educational loans. According to the Consumer Protection Bureau (CFPB) educational loans are more common than all other kinds of consumer borrowing except residential mortgages.

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