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Post by unlawflcombatnt on Apr 10, 2013 11:59:00 GMT -6
from cnbc via Patrick.net Housing's Big Challenge: $1 Trillion in Student DebtApr 8, 2013 By: Diana Olick "Isaac and Stephanie Adams live in Richmond, Va. and are expecting a baby in June; last year they decided to buy a house. With home prices and mortgage rates both at historic lows, it seemed the perfect time. Unfortunately, student loans stood in their way. "We were looking at the market going, 'oh my gosh, the market is awesome right now. We can get some great house that our payments will be, our loan will be great to set us up financially well for our growing family,' and we just weren't able to do it, take advantage of that," Stephanie said. Between the two of them, the Adams' student loan debt tops $100,000. They pay $1100 a month for the loans, and that, coupled with the fact that Isaac was working a contract job, was enough to disqualify them from getting a mortgage. Read More: How the Student Loan Crisis Drags Down Home Prices) Their story is getting ever more common, as total student loan balances nearly tripled between 2004 and 2012, according to a new survey from the Federal Reserve Bank of New York. Now $1 trillion in collective student loan debt is directly affecting the housing recovery. "Short term, you see a decrease in the number of first-time home buyers," said Brian Coester of Coester Valuation Management. "You're going to see somebody who would have been able to afford a more expensive house maybe go for the lower version or the downgraded version." First-time home buyers usually make up over 40 percent of the home buying population, but their share has hovered at or below 30 percent during this recovery, according to the National Association of Realtors. The student debt burden has kept many potential buyers out of the market, either forced to rent or to move back in with their parents, like Sophia Chaale. "Without the student loan debt, a year and a half, two years earlier would have been the time I could have afforded to buy a house, and probably something a little bit bigger," Chaale said. (Read More: Surging Student-Loan Debt Is Crushing the System)..."
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Post by jeffolie on Apr 10, 2013 17:09:47 GMT -6
Cutting Student Loans would collapse the US economy The extremely easy to acquire student debt finances the thriving higher education industry much in the same way the military industrial complex grew into a vast complex demanding politicans include military projects to fund jobs in their distrists. Cut this thriving sector and the economy would immediately tip into a govt defined recession leading the confidence downward. Most likely they will continue to rent ... many like these result in the declining vacancy rate to continue to decline as more student debt continues to skyrocket as the fastest growing significant portion of the US debt Investors drive RI, Real estate Investment contruction to create rentals now that most do not marry plus the student burden prevents many from getting mortages. RI thrives now as shown by the chart for lumber. ================================= BEWARE: Seasonal peak 10 yr rates, rates, lumber, stocks "Sell in May" cliche applies Look closely at the below lumber chart ... I observe that over 80% of the peaks happen early in the year ... this year may be the same because already the peak in 10 year Treasuries yields above 2% appears to be achieved with a decline in progress as well as for copper. Stocks appear to be creating a broad topping formation with the more popular DJIA leading the lagging techs of the NASDAQ and the QQQ as safe haven buying of dividend producing defensive large caps now draw in RECORD mutual fund inflows ... often a signal of the small investor entering near the tops 3.bp.blogspot.com/-ZYodfkl2UcE/UWQ11J16flI/AAAAAAAAZxg/fArTHHnh0iw/s1600/LumberApril2013.jpg
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Post by unlawflcombatnt on Apr 11, 2013 11:42:29 GMT -6
from CNBC How Student Loan Crisis Drags Down Home Prices[/size][/url] Mar 4, 2013 " The staggering amount of outstanding student debt — nearly $1 trillion owed – is beginning to impede the U.S. economy as a whole, a new report from the New York Federal Reserve suggests, chiefly by robbing the housing market of its richest crop of new buyers: young college graduates.
The statistics in the report are dismaying in themselves. With the number of borrowers approaching 40 million nationally, including more than 40% of 25-year-olds, the average balance on their loans has risen to $25,000. About 6.7 million of all student borrowers, or 17%, are delinquent on their payments 3 months or more.
"Delinquent student loan borrowers have a very difficult time accessing credit and the share of those borrowers is greater today than in the past," said Donghoon Lee, a senior economist for the New York Fed and one of the authors of the report.
For the average homeowner, the worst news is that these overleveraged and defaulting young borrowers no longer qualify for other kinds of loans — particularly home loans. In 2005, nearly 9% of 25- to 30-year-olds with student debt were granted a mortgage. By late last year, that percentage, as an annual rate, was down to just above 4%.
The most precipitous drop was among those who owe $100,000 or more. New mortgages among these more deeply indebted borrowers have declined 10 percentage points, from above 16 percent in 2005 to a little more than 6 percent today.
"These are the people you'd expect to buy big houses," said student loan expert Heather Jarvis. "They owe a lot because they have a lot of education. They have been through professional and graduate schools, but their payments are so significant, they have trouble getting a mortgage. They have mortgage-sized loans already."
For years, economists and student advocates warned that the greater debt load would have an adverse impact on graduates' borrowing power. Now the statistical evidence is mounting. Last month, a Pew Research Center survey found that the share of millennials who own their homes had fallen from 40% to 34% during the recession, with a similar decline in residential debt....
The implications for the housing market are serious. The number of first-time homebuyers, more than half of whom are aged 25 to 34, has been shrinking since the recession struck, and young buyers now make up their smallest share of the housing market in more than a decade.
In February, the Consumer Financial Protection Bureau asked private lenders to suggest options for relief of student loan borrowers. "They are increasingly concerned about the effect of student debt on household formation to see if there's anything they can do to thaw the marketplace," said Mark Kantrowitz, publisher of the financial aid website Finaid.com.
But existing efforts to prevent delinquency on federally backed loans — such as basing the size of borrowers' payments on their income — have sometimes made getting a mortgage more difficult. "It confuses the mortgage process," said Jarvis. "Income-driven programs do help them afford a home and ought to make them more creditworthy, but they have not communicated well."
The best fix for everyone would be a faster growing economy, which would provide jobs and higher incomes to those who have borrowed. Until then, Jarvis sees the average college grads' situation as a Catch-22. "If you don't prioritize your student loan debt you won't be able to get credit in the future," she said, "and if you do pay it, you won't be able to afford anything else."
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Post by unlawflcombatnt on Apr 11, 2013 11:51:23 GMT -6
from CNBC Student Loan Debt ClimbsJan 2013 by Paul O'Donnell "Americans now owe an average of $27,253 in student loans as the delinquency rate has increased by more than 47 percent since 2005, according to a new report. Some 27 million borrowers, or slightly more than 13% of the country, have 2 or more outstanding student loans, according the report from FICO Labs, the research arm of the credit-score agency. That number has more than doubled in the past 8 years. In the 2005 report, the average student loan debt was $17,233. In the latest study, the average credit score for new loans was going down as students with less ability to repay their loans are being granted loans with fewer questions. The reason student debt is rising so quickly isn't hard to guess. The cost of attending college has been skyrocketing, while the recession and the scarcity of jobs over the past five years has sent 20-somethings back to school in droves. Difficult economic times "disproportionately impact young people," said Frederic Huynh, senior principal scientist at FICO, A study by the Federal Reserve's New York branch last year showed $580 billion of the total $870 billion in student loan debt is owed by people under age 40. The total now exceeds credit card debt ($693 billion) and auto loans ($730).(Read More: Student-Loan Delinquencies Now Surpass Credit Cards) The recession is hardly the only factor driving the growth in student loans, which have simply become easier to get. In 2010, the Obama administration pushed through legislation that made the federal government the primary issuer of student debt, and encouraged borrowing by cutting credit requirements, capping interest rates and reducing monthly repayments to 10% of a graduate's discretionary income, from 15%.
Some observers, including Republicans in Congress, have called the White House's approach a recipe for disaster, while Democrats have moved to lift the burden of debt further by forgiving any loan of any amount on which a graduate has paid 10% of his or her discretionary income for 10 years.
Critics are comparing the current situation to the mortgage debacle of the early 2000s that created the housing crisis and helped to bring on the recession.
FICO's report suggests that student debt obligations have already been downgraded in many Americans' minds. Student debt is unlike other debt by nature, because it is unsecured, Huynh pointed out. "If I stopped making my car payments, they would repossess my car. But the lender can't take my degree back. This influences the higher rate of delinquency."
Student debt is also becoming different in other ways. One chart in the report shows how student-loan debtors pay their other obligations. "What was consistent was that they were least likely to pay student loans," said Huynh. Those who also had auto loans and mortgages would put resources toward those payments first (though, perhaps because of the foreclosure crisis, delinquency on mortgages grew at a much higher rate than on college loans in the period under study). An interesting side note is that car loans are now more likely to be paid before mortgage loans, a switch from 2005.
Most curiously, as the median FICO score of a student borrower fell from 670 to 665 overall, the behavior of even those with better credit scores deteriorated when it came to repaying student debt. A student borrower with a credit score of 697 today is behaving like someone who had a credit score of 667 eight years ago.
"If a lender set a cut-off score of 667 to achieve 10:1 repayment odds in 2005," the report said, "they would need to raise their cutoff 30 points to achieve the same level of risk in 2010." This is a far shift than any other kind of debt in the recession.
Whether or not student borrowers take their debt seriously, the credit agencies do. "Any default can have a material impact on your score," said Huynh, and the FICO reports, no doubt with gratification, that the agencies' scores still match up well with the actual credit risk posed by college kids. FICO urges greater efforts to educate high-school seniors and their families about what student loans can mean to your financial future.
But among lenders, delinquency on a student loan is clearly not as significant a blot on a person's financial record as on other kinds of debt. That's because, statistically, credit-card defaults are much better indicators of credit unworthiness .
Nothing in report suggests that college grads are simply cavalier about borrowing. Rather, as their financial predicament deepens with the amount they owe, their account balance may lose its sense of reality. In 2005, people who owed $100,000 in student loans were a better risk than the rest of the population. These steep borrowers were more likely then to have bright prospects and burgeoning salaries.
Today, the $100,000 borrower is a worse risk, reflecting the hopeless position in which a young person can find themselves, even with an expensive college degree. Were mere irresponsibility to blame, defaults would logically be equally common for less consequential amounts. Instead, the turning point for increased risk, according to FICO, comes at about $40,000. "
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