Current Student Loan System in the US

Currently, about 18% of American adults are still repaying nearly $ 1.6 trillion in student loans. In the past ten years, the total student debt in the United States has increased by 107%. These figures reflect a series of problems in the current debt system of the United States. The Wall Street Journal reported that the US government now supports a new plan to link debt to income, which allows borrowers to limit their repayments to 15% of disposable income. This reduces the monthly repayments of student loan lenders, and it may also extend the repayment period.

However, most of Chinook's loans also support two types of bonds with maturities of 2043 and 2054, respectively. Longer repayment terms also mean that the risk that many student loan-backed bonds will not be paid in time increases, so investors holding these bonds may not be so happy. Rating agencies that have been staring at the risk of bonds will also jump out, reducing the credit rating of these bonds, and investors may suffer losses as a result. In order to maintain a high credit rating, some bond issuers and investors have decided to extend the maturity date of bonds for decades to ensure that bonds are paid in a timely manner. 

Bonds backed by Chinook loans are also included, and their maturity dates will be extended to 2083, when she will turn 114. For some bond issuers in the United States, extending bond maturity is an immediate method to prevent bonds from becoming 'junk grade' and maintain a high credit rating. Some bond companies have also experienced a roller coaster rating. On November 1, 2016, $ 406 million of Aaa-grade bonds were downgraded to Junk by Moody's Corp. (a major

50-year-old Julie Chinnock still owes about $ 250,000 (about 1.735 million yuan) in student loans, and even sold her home in order to repay the loan. She is very happy now because she has a new repayment plan and can return to 114 years old. Chinook is not alone. Currently, about 18% of American adults are still repaying nearly $ 1.6 trillion (about 11 trillion yuan) in student loans. In the past ten years, the total student debt in the United States has increased by 107%. Behind these figures reflects a series of problems in the current debt system of the United States. The Wall Street Journal reported on the 7th that the US government now supports a new plan to link debt to income, which allows borrowers to limit their repayments to 15% of disposable income. This reduces the monthly repayments of Chinook and other lenders, and may also extend the repayment period of many loans.

However, most of Chinook's loans also support two types of bonds with maturities of 2043 and 2054, respectively. Longer repayment terms also mean that the risk that many student loan-backed bonds will not be paid in time increases, so investors holding these bonds may not be so happy. Rating agencies that have been staring at the risk of bonds will also jump out, reducing the credit rating of these bonds, and investors may suffer losses as a result. In order to maintain a high credit rating, some bond issuers and investors have decided to extend the maturity date of bonds for decades to ensure that bonds are paid in a timely manner. 

Bonds backed by Chinook loans are also included, and their maturity dates will be extended to 2083, when she will turn 114. For some bond issuers in the United States, extending bond maturity is an immediate method to prevent bonds from becoming 'junk grade' and maintain a high credit rating. Some bond companies have also experienced a roller coaster rating. On November 1, 2016, $ 406 million of Aaa-grade bonds were downgraded to Junk by Moody's Corp. (a major U.S. rating agency). 

Later that month (they changed the bond's maturity date from 2026 to 2055). A few weeks later, Moody's upgraded its rating to Aaa. Many student loan-backed bonds, including Chinook, are currently rated AAA. It is reported that bond issuers have extended the maturity of approximately $ 11.5 billion in outstanding bonds by up to 54 years. For investors, these bonds (student loan-backed bonds) are attractive because government-guaranteed risks are low and their yields are healthy, often higher than high-risk bonds backed by credit card debt, and Investors sell free. Major credit rating agencies, such as Moody's and Fitch Ratings, believe that if a security cannot be repaid before its maturity date, they will downgrade it, even if the underlying loan for the security has been obtained by the US Federal Government guarantee. 

Fitch spokesman Sandro Scenga said: 'Even if all principal will eventually be recovered after the maturity date, this must be considered a default, whether a technical default or other default.' The downgrade of bond ratings could hurt investors, and Theresa O Neill, an analyst at BofA Securities, said: 'People don't want to buy bonds that have been downgraded.' Overall, Americans owe about $ 1.6 trillion in student loans, a small portion of which is securitized and held by investors who buy loan-backed bonds. 

These federally guaranteed student loan-backed bonds are sold by private lenders. According to the US Department of Education, about $ 262 billion of these loans are still outstanding, and 26% have defaulted. Under the guarantee, the federal government will repay the loan when the borrower dies. But the US Congress terminated this (guarantee) program in 2010, replacing it with a direct loan through the Department of Education. Data from the US Treasury show that these new loans held by the government total about $ 1.2 trillion, of which 10% (about $ 120 billion) are in default. 

Student loans are an important part of American loans, and American household debt burdens continue to increase. According to data from the Federal Reserve Bank of New York, as of the end of September 2019, the total outstanding debt of American households reached a record $ 13.95 trillion, accounting for about 73% of GDP. Among them, housing mortgage loans accounted for 2/3 of total household debt, followed by student loans, accounting for 11% of total household debt.

The US Consumer and Business Channel (CNBC) reported at the end of last year that approximately 44 million people in the U.S. were carrying nearly $ 1.6 trillion in student debt and about 242 million U.S. adults, which means that approximately 18% of U.S. adults are paying back Student loans. Federal Reserve data shows that student debt has increased by 107% in the past decade. Q1 U.S. Student Loan Amount from 2009 to 2019. But the Wall Street Journal pointed out that the loans did not overwhelm Chinock who sold and repaid the house. 

She received two master's degrees and a doctorate. Chinnock said she has been insisting on returning to school in order to increase her income to pay off her accumulated debt. In 2017, she sold her Oregon house and repaid (partially) her student loan for about $ 185,000. Now, Chinook rented a house and postponed retirement savings. He also bought a new car to maintain his balance while paying off student loans. 'I'll be responsible for the loan,' Chinnock said.

One day in May of this year, Robert Smith, a well-known black investor in the United States, came to Morehouse College in Georgia, USA, and addressed the 2019 graduates. After his speech, Smith sent a gift of ecstasy to the students present: he will pay for all the students who graduated this year! It is estimated that Smith will donate $ 34 million to pay off all the student loans for the college's 2019 graduates. The Financial Times referred to Smith's move as the 'most dramatic' charitable donation in the United States this year.

In fact, more and more American charitable donations have been donated to education in recent years. According to the GivingUS annual report, US charitable donations to education in 2018 amounted to $ 58.7 billion. More and more charitable donations are donated to education, and the reason is simple, because American university tuition is arguably the most expensive in the world, and the student loans that American students bear for this are also the highest in the world.

According to the statistics of CollegeBoard of the American Educational Research Organization, in the 2018-2019 school year, the average tuition for American state students is $ 10,230, the average tuition for out-of-state students is $ 26,290, and the average tuition for private universities is $ 35,830. The annual tuition of private universities is more than 50,000 US dollars. Taking the 2018-2019 school year as an example, Harvard tuition is 46,340 US dollars, Stanford is 50,703 US dollars, MIT is 51,832 US dollars, New York University is 51,828 US dollars, Brown University is 54,230 US dollars ...

In addition, whether public or private, students' room and board costs must exceed at least $ 10,000 a year, plus necessary expenses such as living expenses, books, computers, etc., and the minimum annual cost of attending a private private school in the United States is at least $ 70,000. . The median income for American households in 2018 was only $ 61,000. An average American family does not eat or drink for a year, nor can it afford an undergraduate from a prestigious school.

Moreover, the increase in tuition fees in American universities is far faster than inflation and income growth. From the end of the 1980s to the present, the tuition rate of American universities has increased four times that of inflation, and eight times that of household income. Therefore, there is only one solution, which is student loans. As of now, 44 million Americans carry student loans with a total loan of about 1.5 trillion US dollars, which is close to the one-year gross domestic product (GDP) of New York State, the third largest economy in the United States.

Also, the interest rate for unsubsidized student loans is as high as 6.08%, and the 30-year US home loan interest rate is only 3.77%. Forty-four million Americans carrying student loans have an average debt of about $ 35,000 each, and the annual interest on each person alone exceeds $ 2,100. For young people who have just graduated, student loans are like a mountain, and they are out of breath before they start their careers.

According to the latest financial data disclosed by the US Congress, a total of 68 members of the Senate and the House of Representatives are still repaying student loans, either their own or their children, with an average debt of $ 38,000. Among them, the largest pressure on loans was from Texas female Rep. Veronica Escobar. At the age of 49, she not only failed to pay off her student loan, but also carried her child's student loan. The total debt exceeded $ 60,000.

In the United States, 62.5% of lenders cannot pay off student loans before the age of 30, which means that as they start a family, they also face multiple loan pressures such as student loans, car loans, and home loans. This has also led to a rapid increase in the default rate of student loans since 2012.

According to the statistics of the Federal Reserve Bank of New York, as of the first half of 2019, 35% of consumer credits that had severe defaults were student loans, which far exceeded car loans and housing loans. Student loans have become the biggest cause of personal credit defaults in the United States. As of the first half of 2019, student loan default loans amounted to $ 89 billion.

Also, the pressures faced by different ethnic groups are not the same. Because of the relative poverty of black college students, the proportion of loans (77%) is much higher than the national average (60%). However, black families with a bachelor's degree or higher still earn 23% less than the median income of a family with a bachelor's degree or higher in the United States.

Higher loan ratios and lower post-graduation income mean that black students have far more pressure to repay their loans than other ethnic students. This is why Smith ’s donation action has sparked heated media discussion in the United States, because the proportion of black students at Morehouse College is as high as 94.6%.

Student loans are also changing the family relationships of Millennial Americans. Traditionally, Americans who advocate independence often do not continue to ask their parents for help as adults, but today's high tuition fees have forced them to turn to their families. New York University professor Caitlin Zaloom argues in his work on student loans that increasingly high college tuition has tied American families and children more and more tightly, and the family relationships of the American generation have changed dramatically.

With a huge debt of $ 1.5 trillion, rising credit default rates, and increasing financial and mental pressure on students and families, the US student loan crisis is imminent. To this end, Democratic candidates Elizabeth Warren and Bernie Sanders, who are vying for the 2020 presidential election, have advocated that the government pay for the loans.

According to Warren's plan, the government will write off 95% of student loans, and she advocates an annual tax of 2% on 75,000 families with a net worth of more than $ 50 million in the United States. In other words, Warren's plan is to let the wealthy Americans pay for student loans. But the problem is that not all rich people are Smith, and it is sad to pass a bill in the US Congress to increase taxes on the rich. Warren, who came out of poor families, has a beautiful original intention, but in the current American environment, solving the student loan crisis by 'robbing the rich and helping the poor' can only be a good wish.