Are Connecticut Student Loans Headed for a Melt Down?
Most Connecticut residents do not realize that young people that have student loan and borrowers who have subprime mortgages have many of the same qualities. As a result, if the student loan market experiences anything like what the subprime market went through, the consequences on the economy may have the same devastating impact.
Can you think of the common traits that Connecticut college students share with student loans and Connecticut subprime mortgage holders? Well let me start by telling you that it is a lot more than you think. To begin with, they both seem to share a poor education on financial matters about their borrowing decisions. And due to the large numbers of both Connecticut college graduates with student loan debt and homeowners with subprime mortgages they can have a devastating impact on the economy if enough of them default on their loans.
It is no big secret that adjustable-rate mortgages (ARMs) lead the list of problems that are facing the mortgage industry. The main problem hinges on the fact that mortgage companies offer low teaser rates to get homeowners in the door, but the required payments are not even enough to pay the interest on the loans. Therefore when the ARM adjusts upward, the majority of homeowners were forced to refinance to another mortgage in order to try and make their monthly payments. However, at the same time this was going on the real estate values all over the country cooled off and were slumping. As a result the loans of these subprime borrowers were denied and were literally pushed into default or foreclosure.
If we take a look at Connecticut college graduates with student loans we see that they face similar problems. Just like the mortgage companies the Connecticut student lenders also offer a low teaser rate which adjusts tremendously after the introductory period. Just like their subprime counterparts, students are finding themselves unable to make payments once the loan adjusts upward.
In most cases borrowers of both student loans and subprime mortgages claim that they were misled into agreeing to these loans by lenders who withheld vital information. In a response to these claims, lawmakers are demanding that there be increased disclosures and information provided, reviewed and discussed with the loan applicants on college campuses. There has also been talk of reforming laws that would require student loan lenders to disclose their loan data.
To be fair to the industry it is important to note that many Connecticut student loan lenders do offer this information voluntarily, which helps borrowers make better choices. Many colleges and universities have also become more proactive and supportive in educating students about all the details surrounding student loans. Many schools have a borrowing consult offered by their financial aid advisor.
After spending time look at the problem that the economy is facing it is has become evident that there is no easy solution for the student loan problem. However, Connecticut college students need to take a good look at the meltdown of the subprime market, and learn the lessons that come with irresponsible lending and borrowing.
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