Mountain-size student loan debt causes enormous financial problems for Millennials

For many 20- and 30-somethings, paying off the cost of student loans is a necessary priority, coming before marriage, having a family or buying a house.

A recent report titled “Student Loan Affordability” from the Consumer Financial Protection Bureau (CFPB), suggests myriad ways in which student loan debt may be having a ripple effect on the economy – and affecting the daily lives of graduates. Based on more than 28,000 comments submitted by consumers and industry leaders, the report found that debt held by Millennials forces the generation to:

• Put off home ownership
• Delay opening or diverting money from retirement accounts
• Impedes the ability to take small-business loans
• Delay purchasing big ticket items that the economy depends on to grow, such as the buying of a new car.

Rising tuition and anemic job opportunities feed the cycle, forcing a generation with more student loan debt than any other, to forgo expected purchases of their age group and avoid debt collectors, wage garnishments, and denial of professional licenses. To succeed, recent graduates are diverting disposable income away from leisure, home and auto investments, and savings accounts, all of which adversely affects the economy.

If a Millennial’s starting annual salary allows for servicing the debt, student loan repayment is manageable and can proceed without worry. This is so for the average graduate, according to Mark Kantrowitz of Edvisors.com, but there are cases where debt cannot be serviced or managed – and default is soon to follow.

In addition to acknowledging that student loans are a heavy long-term burden and feed aggressive debt collectors more work than they can handle, it requires people to be savvier about higher education, according to Bob Mackey, president and CEO of Housing and Credit Counseling, a Topeka-based non-profit organization.

“More and more students should be looking at the kinds of areas of emphasis in college that appear to be, after graduation, more employable,” Mackey says. He recommends building up savings before going to school, working during college, and considering community college for the first two years of schooling. By positioning themselves for a larger income and a smaller debt bill, students can significantly mitigate the likelihood of default and all of its negative side effects.

If a student loan goes into default, expect a third party debt collector to soon start making contact, and it can be a real ordeal. Some collectors employ harassing behaviors to collect debts because they know the chances of being successful are demonstrably greater when harassment, abuse and deception are used as tools, even if the Fair Debt Collection Practices Act (FDCPA) forbids such conduct.

The lesson to be learned here is think smart, think ahead when it comes to higher education. Make a success plan that you can live with, and don’t think you’ll worry about it later. And if you think you are or may have had your FDCPA rights violated by any uncivil, harassing, abusive, deceptive or other tactics, call 1-800-NOT-FAIR for free legal representation. Or fill out our Free Case Review form. We will evaluate your situation, and represent you for free if you have a case.

Source: Hadley Malcolm, USA Today http://www.usatoday.com/story/money/personalfinance/2013/06/30/student-loan-debt-economic-effects/2388189/?sf14533143=1

Student Loan Affordability: Analysis on public input on impact and solutions http://files.consumerfinance.gov/f/201305_cfpb_rfi-report_student-loans.pdf