By NAR 2013 Vice President Bill Brown
“Whatever the cost of our libraries, the price is cheap compared to that of an ignorant nation.” That sentiment from Walter Cronkite is being tested as the cost of an education soars ever higher.
The College Board Advocacy & Policy Center’s Trends in College Pricing 2012 report found that overall the average cost of tuition and fees has risen for both public and private schools by over 4 percent, reaching up to $60,000 per year.
A college education helps people get better jobs and gives them a leg up in climbing the economic ladder. But with the high cost of a college education these days, many students have to take out loans to afford tuition.
The result is that students are piling up debt. The New York Federal Reserve reports that total U.S. student debt has almost tripled over the past eight years to reach a total of $966 billion.
The overall number of borrowers past due on their student loan payments has also grown, from less than 10 percent in 2004 to 17 percent in 2012.
The Consumer Financial Protection Bureau (CFPB) raised the issue of whether this debt will have a domino effect on the economy. Their concern is that young people are using a larger portion of their paycheck to pay off debt than for other purposes. This could keep them out of the economy, particularly the housing market.
While approximately 85 percent of student loans are backed by the federal government, the rest are held by private lenders. Now, there is an issue with these private loans. The Fed’s report says the growth in student debt is caused by a combination of more students attending college, more parents taking out loans for their children’s education and a lack of available options for discharging the debt.
While government student loans have options for modifying the loans, (i.e., deferment or making payments a percentage of income) private loans do not. According to the CFPB, they’ve heard from thousands of private student loan borrowers who are willing to make good on their debt, but are seeking a more affordable payment.
The CFPB has issued a “Request for Information” to gather feedback from borrowers, lenders, schools and everyone with a stake in the success of the lending market. As REALTORS®, you’re on the front lines of this issue and will be impacted by whatever the CFPB’s decides.
Please share your stories with us about how student loan debt is impacting sales in your area and, in particular, the impact on individuals. We want to hear from you.