Debt And The American Dream – Protests in Union Square Park, New York, on a day when student loan debt is estimated to top $1 trillion. Photo: Alamy
Forget the fence. Rising college costs and government policies have led to a trillion-dollar debt crisis. Can Congressional Action Help?
Debt And The American Dream
With $60,000 in student debt, Cameron Vigil doesn’t expect to get married or start a family anytime soon, or even afford basic living expenses.
American Dream Deferred By Debt
“This definitely prevents me from buying a car or a house,” said Vigil, 21, a Denver resident who is pursuing a master’s degree at Regis University. He estimates his debt will increase to $100,000 by the time he completes his Ph.D. “I knew I had to keep doing it.”
The United States is facing a deepening financial crisis, with student loans topping $1.5 trillion. Nearly two-thirds of graduates in 2017 had to pay back their student loans, according to the California Institute for College Access and Success, and about 9 million people have defaulted.
When the recent recession forced universities to raise fees and, at times unpleasantly, for-profit colleges exploited students, debt rose to unprecedented levels. Experts fear there could be a major disaster for the economy as a generation abandons homeownership and other steps that constitute the American dream.
Borrowers who leave college without graduating are also burdened with debt and less able to get the jobs they need to pay it off quickly. And Republican efforts to reduce borrower protections put in place under the Obama administration are making the situation worse.
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The federal government’s student loan watchdog, Seth Frotman, left his post last month after announcing his resignation in late August. In his scathing letter, he accused his boss appointed by Donald Trump of using the agency “to satisfy the whims of America’s most powerful financial companies.” As student loan ombudsman, Frotman is responsible for handling borrower complaints about negligence and aggressiveness from lenders and debt collectors.
“People want to go to college because they want the benefits, and federal grants and loans should help them achieve that goal,” said Debbie Cochrane, vice president of the Institute for College Access and Success. “We should all be concerned if students are harmed after graduating from college.”
According to the Federal Reserve, student loan debt in the United States has increased by $400 billion over the past five years, due in part to rising college costs following the 2008 financial crisis. Public college and university budgets, measured per student spending, are down 15% from 1990 until 2015, according to the Century Foundation. But the percentage of tuition costs covered by students and federal aid, compared to state and local governments, increased from 25% to 47%.
The average 2017 graduate who borrowed to pay for college had nearly $30,000 in debt at the time of graduation, up from less than $13,000 in 1996.
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“There’s something you want to get out of your head,” said Reid Setzer, director of government affairs for Young Invincibles, an advocacy group pushing for credit reform. “But it’s hard to imagine a future where you don’t have that debt.”
Minority and low-income graduates are the groups most impacted: Graduates from low-income families are five times more likely to default than their higher-income peers, according to the institute’s report, and more than one in five black graduates would not graduate within 12 years of admission. campus. , damaging a person’s credit score and causing other financial problems. Nearly 60 percent of students were in the poorest quintile in 2015, up from 46 percent in 1990, according to the College Board, which is good news but likely increases the risk of loan default. Later.
Borrowers who default on student loans are sometimes barred from getting a driver’s license or work permit, reducing their chances of getting a job that would help them pay off the loan.
Meanwhile, the Trump administration and Republicans in Congress are making it harder for borrowers to prove they were defrauded by colleges that lied about their graduates’ job prospects. Current regulations have helped protect students from failing private colleges: Nearly all of the 100,000 borrowers who applied for federal loan forgiveness attended for-profit schools, Cochran said.
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But one of the causes of the debt crisis lies with the borrowers themselves, said Keith New, a spokesman for the Pennsylvania Higher Education Assistance Agency, which administers the state’s student aid.
Financial aid counselors often complain that students fail to explore grants and other aid options before applying for loans, which can have high interest rates and terms that leave borrowers trapped for decades.
“There is definitely a financial literacy issue for young people,” New said. – They borrow too much and don’t understand the consequences.
“At some point, this will reach a tipping point that requires Congressional action,” Setzer said.
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Meanwhile, Cameron Vigil is taking graduate classes online because he and his girlfriend share a car. He said he worked two jobs and the thought of paying off decades of student loans weighed heavily on him.
“Honestly, it’s frustrating sometimes knowing how long I’m going to have to deal with this,” he said. “But this is a sacrifice I am willing to make.” Artem Tepler, founder of real estate firm Schon Tepler, dies at 41 New Jersey lawyer admits defrauding victims of six real estate sales Jury finds NAR broker guilty in historic bribery lawsuit Hear the story of the billionaire behind some of Miami’s most ambitious projects
Barry Sternlicht of Starwood Property Trust and the American Dream mall in East Rutherford, New Jersey (Getty, American Dream)
Barry Sternlicht may be ready to pay off his company’s debt at the American Dream mall in New Jersey.
The Path Toward The American Dream Is Not Paved In Debt
Starwood Property Trust is considering selling a $230 million loan on the East Rutherford complex at a discount, Bloomberg reported. The interest rate on Starwood’s debt is 70 cents on the dollar.
The loan is part of a $1.7 billion package provided by Triple Five Group to finance construction of the entertainment complex. It’s one of several financing packages that homeowners have struggled to afford since malls opened due to the pandemic, sparking a scramble for the properties.
Starwood has not committed to selling its debt and is still considering all options. However, Sternlicht may be inclined to sell because the loan is not on accrual status, meaning the company has not recognized any current income on the debt. The debt sale will provide capital for Starwood to reallocate to other assets.
Starwood Property President Jeff DiModica recently announced that American Dream’s debt reduces the company’s distributed earnings by 11 cents per year. Starwood reported distributed earnings of 49 cents per share for the second quarter.
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In recent months, the shopping center owner has experienced a number of financial difficulties. In April, a judge ruled that the mall owner must pay nearly $390 million to creditors after defaulting in May 2021; Triple Five is not opposing the lawsuit.
Bondholders and surrounding cities pressured the Hermezian family with a campaign that included lawsuits over delinquent construction contracts. Missed payments reportedly piled up, and the complex lost $60 million in 2021.
Construction loans were the only area where Triple Five received a reprieve, having received a four-year debt extension last year. WATERTOWN, Mass., May 16, 2016 // –A new study released today shows that student loan debt is affecting people’s lives in unexpected ways — and by extension, the entire economy. From college graduates to baby boomers approaching retirement, 72 percent of people who have student debt say it affects their lives every day, and 77 percent say it makes it more difficult for me to “live life the way I want.” With 35 percent of job openings expected to require at least a bachelor’s degree  by 2020, this new data presents a troubling prospect for current and future generations of borrowers and employers.
, written by Kelton Global, shows that while student loan debt hurts people financially, it’s not just money that’s at stake.
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The survey found that student loan debt is causing employees to leave their dream jobs and forgo future education:
“Instead of paving the way for success, these huge education budgets have in some cases backfired,” said Chris Duchesne, vice president of EdAssist. “The amount of student debt people have is hurting their dreams and ambitions, and has the potential to hurt creativity, innovation and companies’ next big ideas.”
EdAssist research reveals more about the impact of student loan debt on the lives and careers of Americans of all generations. 82 percent of people who took out student loans admit that it has caused difficulties in their lives and prevented them from achieving important life milestones, such as buying a car (56 percent), a house (50 percent) or opening a credit card (41 percent). . Forty-nine percent would postpone an engagement or wedding because of debt, and 21 percent would