Student Loan Debt
Student Loan Case
1) Summarize the student loan industry. Answer with respect to both public and private loans and be clear as to which you are referring to.
a) What led to the inception of the student loan market?
The inception of the student loan market started like any other loan market, there were a large amount of borrowers who needed money now to invest in college to make more later that were matched with lenders who had excess funds and wanted return on the funds. The National Defense Education Act of 1958 which provided loans to students in higher education institutions started the student loan market. This was supposed to help train students to get jobs that will help them succeed and in turn help our nation succeed.
b) What major changes have occurred over the years?
The biggest changes in the loan industry have been the recent dramatic increase in enrollment at colleges. An alarming trend in the last twenty years is that appropriations to universities per full time student are going down while public four year tuition and fees are increasing. Total outstanding student loan debt, number of student borrowers and average debt per borrower has been steadily increasing over the last decade. Recent changes include private lenders becoming less inclined to lend.
b.i) Since 2004 both the number of student loan borrowers, and the average balance per borrower has steadily increased, according to data compiled by the Fed New York
(b.i.1) 2004 25-year olds with student debt was just over 25%; grown to more than 40% (2013)
(b.i.2) 2012 Number of student loan borrowers totaled almost 40M and the average balance per borrower was slightly less than $25k
(b.i.2.a) 40% had balances less than $10k; 30% had balances between $10k and $25k; 4% over $100k
c) What is the current source of financing?
c.i) $1T financed by the federal government
c.ii) $.2T financed by private lenders
(c.ii.1) They are lending less
c.iii) Federal
(c.iii.1) Make up about 85% of the
1) Summarize the student loan industry. Answer with respect to both public and private loans and be clear as to which you are referring to.
a) What led to the inception of the student loan market?
The inception of the student loan market started like any other loan market, there were a large amount of borrowers who needed money now to invest in college to make more later that were matched with lenders who had excess funds and wanted return on the funds. The National Defense Education Act of 1958 which provided loans to students in higher education institutions started the student loan market. This was supposed to help train students to get jobs that will help them succeed and in turn help our nation succeed.
b) What major changes have occurred over the years?
The biggest changes in the loan industry have been the recent dramatic increase in enrollment at colleges. An alarming trend in the last twenty years is that appropriations to universities per full time student are going down while public four year tuition and fees are increasing. Total outstanding student loan debt, number of student borrowers and average debt per borrower has been steadily increasing over the last decade. Recent changes include private lenders becoming less inclined to lend.
b.i) Since 2004 both the number of student loan borrowers, and the average balance per borrower has steadily increased, according to data compiled by the Fed New York
(b.i.1) 2004 25-year olds with student debt was just over 25%; grown to more than 40% (2013)
(b.i.2) 2012 Number of student loan borrowers totaled almost 40M and the average balance per borrower was slightly less than $25k
(b.i.2.a) 40% had balances less than $10k; 30% had balances between $10k and $25k; 4% over $100k
c) What is the current source of financing?
c.i) $1T financed by the federal government
c.ii) $.2T financed by private lenders
(c.ii.1) They are lending less
c.iii) Federal
(c.iii.1) Make up about 85% of the