Generation Debt

I haven't read your book yet, however, I am inspired to know there are others out there trying to help young people with personal finance.

I am a financial advisor for Primerica Financial Services and we have partnered with "The ABC's of Making Money 4 Teens" guys who are traveling the world to help teenagers with debt and personal finance.

I started teaching their book in local libraries and will be teaching at my local HS on Long Island pretty soon.

We need more people like you to get the word out. It is a crisis.

I urge you to view their website learn more about their efforts. They seem to be right in line with yours.

Let's Change a Generation!!

Hi Jason, I think you may be confusing our site (which is an information clearinghouse for student loan consolidation refinancing) with a couple of recent books with the title Generation Debt, one by Anya Kamenetz, http://gendebtthebook.com/, and one by Carmen Wong Ulrich, http://www.gendebt.com/. You should probably contact those authors regarding your program.

I've heard it from two customer service agents at Sallie Mae (where they are holding me in financial debtors prison with about $40K in private loans and, up until recently, $170K in federal unsubsidized loans -- which I've reconsolidated with another company) that SM was about to embark on a program of PRIVATE LOAN consolidation in April 2006.

Unfortunately, the customer service rep said she had no additional information to provide about this new program.

It used to be the case that Sallie Mae would "refinance" your private student loans (if you had more than one) if interest rates dropped, but then at some point in the recent past, (I suspect around the time when interest rates started plunging), that they really got greedy and made a decision (consciously?) to not allow this type of refinancing any longer. So, people like me (and I'm sure others) were left out in the cold with a variable interest rate now approaching 7.5%.

I Hope this information is helpful.

Has anyone ever floated the idea of student-loan amnesty? George W. has no trouble throwing free money at millionaires, yet a sustantial portion of the working population is hamstrung with levels of student-loan debt made unbearable by the flat wages in the current economy.

Student Loan amensty is an interesting idea. I know that states provide taxpayers with amnesty periods. What type of program would you envision? It is my intention to pay off my student loans one way or the other, but with the interest rates being charged, etc., I'm kinda lost.

Please explain how this makes any sense?

Student A makes 50K per year and has $2500 of student loan interest. Student A can deduct $2500 of student loan interest.

Student B makes 65K per year and has $10,000 of student loan interest. Student B can deduct $0 of student loan interest!

Student C has no student loan interest (thanks mom and dad!) and borrows 200K to to start a business. Student C can deduct 100% of the interest (15K @ 7%) they pay!

How do we fix this?

A. Make Student Loan Interest 100% Deductible (Best option IMHO!)

B. Make Student Loan Interest an Itemized Deduction like Mortgage Interest (Con - students that need the deduction the most may not itemize their deductions)

C. Student Loan Interest Deduction Phase out should be based on total interest paid vs. total income (not an abitrary 65K). I would guess this is the only option that could squeek by under this administration because they took so much heat for the budget deficit act. Then they can say they expanded tax benefits.

Any other ideas? - news of new legislation?

Many politicians say their goal is to expand the middle class. What a rarely here is the phrase shrink the lower class and expand the upper class! The current student loan interest deduction either keeps the middle class - middle class or the middle class lower middle class.

Add to the limited deduction - the current student loan legislation and the fact that students are getting ripped off by private lenders...good luck getting an education and digging yourself out of debt!

I also came across an interesting article -

http://www.usatoday.com/money/perfi/general/2006-02-22-student-loans-usat_x.htm

Thank you so much for putting out your great book and blog. This is a wonderful public service. It’s great to see someone addressing these issues. Keep beating the drum.

I'd like to chime in for just a second if you’ll entertain me because I think the concept of ‘generation debt’ is worth broadening.

To be sure, student debt is a huge and critical issue for middle class families and graduates. But it is only one part of a much larger picture. I think it would be wonderful if this site could address all of the issues that are contributing to Generation Debt. Generation Debt is an appropriate title for our generation for so many more reasons than growing student loan debt.

I mean it’s overwhelming just how much really is out there threatening our financial future. The disparity between wage increases and tuition increases. In addition to student loan debt, consumer credit card debt is skyrocketing. So is the national debt, along with corporate debt, and government debt.

We have become a culture of debt. On the individual level we live in a world of marketing. These omnipresent messages create a ‘have-it-all’ mentality, which encourages young people to cave into their desires and pay for it all with plastic. Then when the debt piles up those introductory interest rates disappear as a result of the change-in-terms provision that you didn’t read in the fine print. And then in short, you’re screwed!

On the macro level we’re running unsustainable trade deficits. We’ve cut taxes. We’ve increased spending and gone to war. We are importing everything. And we produce virtually nothing (manufacturing is now makes up only 14% of our economy, while financial services now make up 21% of our economy). So basically we’re in the business of shifting debt and money around and sustaining our quality of life through mortgage refinancing and foreign borrowing.

So student loan debt is an important piece of the puzzle but it is just that – it’s one piece of the puzzle that makes us Generation Debt. Debt has become the lifeblood of our society. And because the new Bankruptcy Act, we will enjoy fewer protections from it. And I really can’t begin to explain how totally screwed we are.

The politicians aren’t going to tell us the truth about these issues. The business community sure isn’t going to inform us. Our schools and universities haven’t as yet been willing to step up to the plate. And even the media just doesn’t seem to want to go there (though they seem increasingly ready to start).

Anyway, I’ve said enough. Again, thank you for building this forum. I like the phrase Generation Debt, but when I hear it makes me think of so much more than high tuition bills and greedy education lenders.

Hi Douglas, I think you may be confusing our site (which is an information clearinghouse for student loan consolidation refinancing) with a couple of recent books with the title Generation Debt, one by Anya Kamenetz, http://gendebtthebook.com/, and one by Carmen Wong Ulrich, http://www.gendebt.com/. Anya Kamenetz's book in particular deals with the broader debt issues you mention.

One comment I would have for anyone consolidating is to keep one small loan out, so if you decide to then reconsolidate with a different lender it's possible, and still seems to be possible with the new leglislation.

I made the mistake of consolidating all my original student loans with Sallie Mae back in 1994. Then taking out more loans but also, with a Sallie Mae lender.

The only way I was able to finally reconsolidate in 2003, again, with a different lender was because I had a 373.00 Perkins loan that I fortunately had not included in the first consolidation. The agent told me over the phone that small loan was the only way I could choose a different lender. Even if your current lender seems fine it's nice to have some manuevering room, and if you're able to do it, as you never know what's going to happen with lenders and legislation in the future. One example of that: when I first consolidated in '94, the consolidation rules meant, that all subsidized loans changed to unsubsidized and the whole amount draws interest during periods of deferment. It was a bad move, and one I would not have done if I'd known the rules would change in the future.