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INFOGRAPHIC: The New Indentured Servitude

While President Obama's "Student Aid Bill of Rights" is a prudent and necessary step towards aiding college students, his announcement comes late for the seven million borrowers already indentured to their education debt. In "Forgive Us Our Debts" (Sojourners, April 2015), Virginia Gilbert investigates the cause-and-effect battle of education debt and the way it is hindering a generation of college students. How big is the student debt burden? See below for the poor report card reveal. 

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Forgive Us Our Debts

SARA WAS DESPERATE. She was fleeing an abusive husband, living with her mother in a mold-infested house, and she needed to rent an apartment. A recent college graduate, Sara had a job at a hospital that paid well and provided benefits. Apartment rent was within her means. But the background check came back to the landlord: “Do not rent.”

Sara (not her real name) was $22,000 in arrears on her student loans. The more she tried to pay the debt, the higher the interest rate climbed. Only after she filed for bankruptcy did she learn that none of her student loans were eligible for even the basic bankruptcy protection afforded other debts. At any time, the lender could garnish her wages—even to the point of making it difficult to pay basic living expenses, such as rent and utilities.

Sara is one of the new 21st century debtors, in financial bondage because they borrowed money for education. In 2014, the education debt in the United States totaled $1.2 trillion. More than 7 million borrowers are in default.

Why are education loans so difficult to manage? Credit card debtors often can transfer high-interest debt to another lender for a better deal. Car loan borrowers can walk away from the loan and allow the car to be repossessed. Homeowners can refinance their mortgage or, if all else fails, default and save their money for a rent deposit while the lender goes through the foreclosure process. As a last resort, these types of borrowers can declare bankruptcy and have their debts forgiven or reduced in a manageable payment plan. Bankruptcy courts will not allow debtors to be made homeless just because they can’t pay their creditors.

But if the borrower of an education loan is late with a payment or goes into default, according to Andrew Martin of The New York Times, the lender can levy penalties up to 25 percent of the balance and legally increase the interest rate to several times the original rate.

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Degrees Without Jobs

RECENT YEARS HAVE witnessed a deluge of headlines such as “Jobs Become More Elusive for Recent College Grads” from Reuters and “For Recent College Grads, Recessions Equal Underemployment” from Inside Higher Ed—headlines that make even the most hearty college students experience heart palpitations. According to a 2014 analysis by the Federal Reserve Bank of New York, “the underemployment rate for 22-year-olds is about 56 percent, indicating that more than half of the people just graduating end up working in jobs that do not require a degree,” jobs for which they are overqualified.

To put this into perspective: I am a 22-year-old senior at a private Christian university. Of my close friends who graduated in the last year or two, the only ones who were able to find jobs in their fields were education and nursing majors.

Don’t get me wrong, I love liberal arts and feel grateful for the critical thinking skills, study-abroad opportunities, and philosophical discussions that attending a liberal arts school has afforded me. But learning in the same analysis that “only 40-to-45 percent of recent college graduates majoring in communications, liberal arts, business, and social sciences were working in jobs that required a degree” is troubling at best.

 In addition, seven out of 10 college seniors are graduating with an average of $29,400 in debt due to rising tuition costs for an undergraduate education. The National Center for Labor Statistics found that in the past decade, the cost of “tuition, room, and board at public institutions rose 42 percent after adjustment for inflation.” The situation was a bit (though not much) better at colleges in the private not-for-profit group, like my own, where the average price rise was 31 percent.

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Borrowing Increases Dramatically

Andrew Leonard examines the latest consumer borrowing figures for Salon:

"Consumer borrowing, reports Bloomberg, skyrocketed in March, leaping up by $21.4 billion, more than twice as high as the consensus estimate predicted. Much of the increase, according to Bloomberg, can be attributed to new financing for auto purchases and to students hoping to lock in low interest rates on student loans. (Unless Congress takes action, the interest rates on government-backed student loans will double on July 1.)"
Read his full article here
 

France's "Bank of the Poor" Forgives Debts

GOOD.is reports that some lucky customers of France’s oldest bank have had their loans forgiven, in a gesture that marked the Crédit Municipal de Paris’s 375th anniversary (or is that anniversaire?) The bank has a history of looking out for its customers and was in fact founded (in 1637) as a bank that would give “the needy access to fair banking” — something that was certainly not commonplace in the 17th Century.

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