Ever increasing college tuition and inadequate college savings are being blamed for 40 million Americans carrying at least one outstanding student loan, according to new studies from the credit bureau, Experian. In comparison, only 29 million in 2008, an increase of 84 percent.
Borrowers are carrying approximately four open student loans each, which is up from less than three in 2008. At the same time, the average balance has risen from $23,000 to $29,000. The increase has boosted the nationwide student loan debt to all-time record highs of $1.2 trillion, an 84 percent hike since the beginning of the recession.
Legislators are seeking a way to provide relief to borrowers with a variety of proposed regulation that would allow the option to refinance open loans at a lower rate, require direct details about loans and protect consumers who have had a co-signer pass away or file for bankruptcy; both issues that can lead to disastrous credit issues.
Student lenders are continuing to approve student loans to borrowers so young, they don’t have a proven financial track record or enough credit history to have built up a real credit score. “Student loans are the only credit vehicle where a lender continues to extend credit year after year without knowing the person’s ability, or even willingness, to pay,” Michele Raneri, vice president of analytics at Experian, said of the issue.
Despite the seemingly negative aspects of student loans, the positive is that if a borrower is in a strong enough financial situation to make payments on time, the student loans can actually help you establish and build credit early on. If you’re not, it can have the exact opposite effect. Rod Griffin, Experian director of public education noted that payment history and making on time payments effects your credit score just like any other form of debt.
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