The United States of America has been hit by several fiscal bubbles that have already wreaked havoc in the economy when they burst. After the real estate bubble and the tech bubble, there is enough speculation that the student loans might be the next to join this infamous group. According to the Los Angeles Times, the student loan delinquency rates had dropped to the danger zone after studies showed that the delinquency rates have risen to 16%, which showed an increase of almost 25% in the last 3 years. This debt burden does not only represent a lifelong problem for the student borrower but might also have a broader impact on the US economy.
The student loan balances continue to rise steeply. The average last year was around $27,254 that was up by 60% from the $18,255 that was borrowed in the year 2005. With the sluggish economy and the slower growth in the job rate will mean tougher options for the students to repay their loans. This failure to repay the holders of their student loans will restrict and mar their future chances of getting new lines of credit and when more and more people cannot borrow, the economy will suffer as a whole. Although there are many financial moves that the students can take in order to be able to repay their student loans, very few have the urge to adopt a debt free lifestyle.
The new push by CFPB to alleviate the soaring student loan debt
As more and more borrowers fall back on the private student loan payments, the consumer watchdog of the US, the Consumer Financial Protection Bureau is pushing the students to help them make timely payments on their student loans. The CFPB informed that it is trying to seek proposals to make debt repayments more manageable for the private student loan borrowers; especially those are cash-strapped. The CFPB is well informed of the fact that the private student loan borrowers face even bigger challenges than those who borrow federal loans that have flexible repayment options.
Presently, the repayment options for the private loan borrowers who go through financial hardships vary according to the lenders. The CFPB or the Consumer Financial Protection Bureau is exploring some other options like allowing the private student loan borrowers refinance their student loans with a new loan. This would allow them to leverage the lower market rates, which in turn could easily reduce their monthly payments on the student loans. Although the comments from the student loan lenders and the public are still waiting, after this, the bureau will announce the recommendations for altering the private loans.
The new campaign of the CFPB on relaxing the student loan payments comes less than 2 weeks after President Barack Obama expressed serious concern over the issue during the State Union address. Due to the skyrocketing prices, too many students are not being able to make ends meet with the meager amount of funds that they have. Presently, there are federal government backed loans that are also on default but the borrowers are trying their best to get back on track through the flexible repayment options.
Therefore, as the consumer watchdog of the US steps into the student loan debt industry, it seems that there is more wiggle room for the students. If you are someone who is drowning in private student loan debt mire, you can certainly get help of the steps that are being taken by the CFPB. Refinance your student loans in order to grab the lower rates on your new loan and help yourself get back on track.
Savannah Brien is a financial writer with profound knowledge on the current financial industry. She contributes her articles to different blogs, communities, and websites and loves to help people with knowledge. Some topics covered by her are the credit card debt crisis, the student loan debt disaster and the ways it affects the economy and so on.