Many young Wisconsin residents may find themselves facing large balances on student loans upon graduation from college. With regard to student loans, those graduating now are a part of one of the most debt-ridden generations. The Federal Reserve Bank of New York reports that people under 40 currently hold nearly two-thirds of outstanding student loan debt. As a result, many of those who are struggling with debt are unable to take advantage of low interest rates to buy a home.
To make matters worse, some student loans have interest rates as high as 12 percent. These loans typically cannot be refinanced to get lower rates, the way a mortgage or other loan can sometimes be changed. New federal loans are currently set at 3.4 percent, but that rate is set to increase to 6.8 percent this summer. Last year, Congress chose to extend the lower rate, but it is not clear whether that will happen again.
The inability of young people who are saddled with debt to buy homes makes it difficult for those who are looking to sell their properties, which has a negative effect on an already slowed economy. Recent graduates who are spending most of their monthly income on student loan payments simply cannot afford to also pay a mortgage. Alternatively, many students who chose to skip college and begin working right out of high school were able to purchase homes before their 30th birthdays.
Student loans cannot be discharged in bankruptcy except in extremely rare circumstances, and there is no statute of limitations. Young adults facing overwhelming amounts of student loan debt may benefit from speaking to a Wisconsin bankruptcy attorney about their options, including debt consolidation or negotiating settlements on some loans in order to make loan payments more manageable.
Source: Daily Herald, “American dream eludes under-40s saddled with student debt,” April 21, 2013