U.S. student debt to banks reached a record level of $1,000 billion, amid a stagnant economy and rising costs of higher education, writes Business Insider.
Behind these figures are record bank loans to finance their studies, “student loan” from the private sector, says Mark Kandtrowitz, specialist in such financial transactions. Students loans assume repayment of amounts incurred after graduation and getting a job. “With the desire to fulfill some dreams in mind, students are not aware of the terms of contracts, thinking that they will be able return the loans after they graduate,” said Kandtrowitz.
Unlike state loans, the private loans have variable interest rates, small at first, but can increase by up to 5 percentage points during the loan period. There are also a few solutions for the graduates that are in default, like extending repayment deadlines or repayment of amounts incurred in relation to income.
Here are some stories of people who went to college on credit disclosed in a campaign of the Bureau of Consumer Protection in the U.S.
Steve Macintyre: “I was working in the entertainment industry but lost my job a few months ago and I desperately need money for me to hone in the games and animation,” said Steve. He turned to a loan to finance his university studies in the field but ended up with a debt of over $100,000 without being satisfied with the quality of educational services.
Nick Keith: he took a $60,000 loan from Sally Mae, a company specializing in such financial transactions to attend a culinary school, which later admitted that it published false information on the value of educational programs offered and erroneous statistics on the number of employees in the culinary field. After graduating from school, Nick was hired at $10 per hour rate. “It took me three months to raise the money for the $1,300 first installment of the loan. It was the only one I paid because I had to choose between paying the rent and keep up with paying back the loan,” he said.
The amount that Today Keith has to repay is three times the amount borrowed. Keith worked two years in the culinary field, but remained unemployed following a work related accident. He lives today on disability allowance.
Another horrible story about college graduates burdened with debt is that of a social worker, who chose to remain anonymous. After paying around $350 per month for 14 years, she though the loan was fully repaid. But, according to Sally Mae, the social worker still has to pay back $25,000. Asking representatives of companies why is she has to pay such an interest, higher than the principal, they replied that these are the terms of the contract. Most likely these terms or in the “small print” area hidden at the bottom of the contract.
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