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The Next Financial Shoe To Drop?

May 31, 2010

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Barrie Hardymon

A little story about student debt has been holding steady on The New York Times most emailed list: Placing the Blame as Students Are Buried in Debt.  And, it's kind of terrifying.  Here's a taste:

Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she's been enrolled in night school, which allows her to defer loan payments.

This is not a long-term solution, because the interest on the loans continues to pile up. So in an eerie echo of the mortgage crisis, tens of thousands of people like Ms. Munna are facing a reckoning. They and their families made borrowing decisions based more on emotion than reason, much as subprime borrowers assumed the value of their houses would always go up.

Ron Lieber, in the Times article, suggests that maybe schools need to take a larger role in preventing this kind of situation in the first place, saying: "the financial aid office is still in the best position to see trouble coming and do something to stop it."

Last week, we talked about the job market for recent grads, and found that while things aren't as grim as last year, finding work is still tough going for many.  Imagine, now, that you're saddled with $100,000 of debt, while you're looking for a job.  Youth isn't as much fun as it used to be.

 

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