Student loans have moved from burdening the young to plaguing the old.
Student loan debt is a pox on the American pocketbook. This terrible national burden now exceeds credit card debt in the U.S. and is growing exponentially.
Tuition costs have been rising at roughly three times the rate of inflation in the U.S. The very ease of borrowing means colleges have no incentive to run efficient campuses and keep tuition affordable. It’s like a vicious circle.
Now the Federal Reserve Bank of New York reports seniors citizens who are on fixed incomes are in default on $36 billion in co-signed student loans!
If you are a senior, do not co-sign a student loan for your grandchild, even though you want to as a sign of love. The only exception to this rule would be if you are of significant wealth, in which case, just pay the tuition. You have an exemption from gift tax rules if you pay the university directly. But if you not independently wealthy, you can’t afford to co-sign on student loan debt.
Let’s go to the other extreme. I told you recently how there are 20-somethings drowning in debt, which is overwhelmingly student loan debt. Am I saying don’t go to college? No. What I’m saying is make it affordable, even if you have to study where you didn’t want to.
I know many people will hear me and still doing a lot of student loan borrowing anyway. If that’s the case, be sure you always borrow under the federal student loan program, never with any private loans.