As the cost of college continues to rise, student loan debt has reached an all-time high. The combination is putting a particularly troublesome pressure on borrowers, one expert says.
“Student loan debt is super debt, even worse than a mortgage on your house,” Michael Calhoun, the president of the Center for Responsible Lending, said on Yahoo Finance’s YFi PM.
Just like the debt collectors who resorted to garnishing wages from people in the aftermath of the Great Recession, the process is repeating today, he added: “We have people having their Social Security garnished by the government for student debt.”
In the third quarter of 2018, $230 million in owed funds were reclaimed through wage garnishment, according to Student Loan Hero.
“Today, student loan debt is the number one reason that disqualifies people from buying a home when they come to us for a mortgage,” Calhoun added. “You have about 44 million people with student loan debt today… In 2003, the total student debt was just over $300 billion. Today, [it’s] over $1.6 trillion.”
‘This has gone backwards’
On top of zealous debt collectors, borrowers are also seeing some important protections afforded to them by the previous administration being eroded, Calhoun noted.
For example, in 2014, the Obama administration announced the gainful employment rule, that prohibited schools from receiving federal funding if their students consistently left with high student debt. Under the regulation, a graduate’s estimated annual loan payment would not exceed 20% of their discretionary income, or 8% of their total earnings.
This year, Secretary of Education Betsy DeVos rolled back on the Obama-era rule, claiming it “unfairly targeted for-profit colleges.”
“That’s one of the things in the last four years, this has gone backwards in terms of less bringing a solution here,” Calhoun said. “And there’s actually some bipartisan support and recognition that there are things that could be done that would help people just make plain sense.”
He continued: “Because with for-profit schools, not only do they have the highest failure rates by far than any of the others… The vast majority of those students have poor outcomes and just don’t get that increase in income. And then you get the debt.”
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