Here are the best articles from around the web this week talking about student loans…

For the week ending Friday  May 17, 2013

Student Loan News:

1. The truth about student loans: 

As I finish up my second year of life in the “real world,” more and more is being said about the dangers of student loans and how they are our nation’s next big financial crisis. This is both alarming and refreshing.

Whenever I talked about student loan debt before, I felt guilty. Getting accepted to and going to college is still such a privilege to a good portion of the population, so why would I ever complain about how much it costs?

It was my choice to attend a private liberal arts college, so I should accept the consequences and be quiet about it. That said, I do not want to complain, rather relay a sense of reality that was not clearly presented to me while I was at Knox, attending classes, studying in the library, going to the Gizmo, soaking up sun on Post Lawn and waiting eternally for Flunk Day. More Details:

Student Loans

2.  Pay Off Student Loans or Start Investing: What's the Better Choice?

In a recent Lifehacker thread, some college students asked me: should I focus on paying down debt or should I start investing? As the CEO of growth stage investing service Betterment, I’m a huge advocate for getting invested early. Time in the market is one of the biggest factors in building long-term wealth. But it’s not as simple as it sounds.

The rule of thumb: Start by paying off all higher interest debt first, like credit cards or student loans with rates of more than 5%. Make all minimum loan payments, no matter what the rate. If you have a 401(k) match at work, maximize it. Then, invest according to your goals. For more info:

3.  Obama Student Loan Policy Generates $51 Billion Profit, Causing Democrats To Lash Out: 

Two members of the Senate banking committee on Wednesday criticized excess government profits generated off loans made to student borrowers and their families, increasing pressure on Congress and the Obama administration to reform student lending programs.

“Wall Street, student loan servicers, and now the government are reaping profits at the expense of students,” said Sen. Sherrod Brown (D-Ohio). “When everyone is benefiting from student loan policy except students and graduates, we have a problem.” Understand more:

Student Loan Blog Posts:

1. Republican House bill proposes variable rates for student loans: 

In advance of an automatic increase on student loan rates, House Republicans will take up a proposed bill that would peg the interest students pay on their loans to market-based rates, which some criticize as risky.

The “The Smarter Solutions for Students Act,” introduced by Reps. John Kline (R-MN) and Virginia Foxx (R-NC), would move federal student loans from a fixed rate, currently at 3.4 for percent but set to more than double to 7.8 percent on July 1, to a variable one. The new rate that would change yearly based the 10-year Treasury note rate, currently 1.95 percent, plus 2.5 percent. This means that federal student loan rates, rather than jumping to 7.8 percent, would go up to about 4.4 percent, and PLUS loan rates, which parents take out on behalf of their students, would drop from 7.9 percent to an estimated 6.8 percent. Unsubsidized, or private student loans, would have to be offered at the same rate as federal student loans. The House Education and the Workforce Committee is scheduled to debate the bill on Thursday. Click to continue:

2. Warren puts student loans in spotlight: 

There was an interesting political fight last summer over student loans that the White House took very seriously. At issue was a 2007 law, that was set to expire, which kept the interest rate for federal Direct Stafford Loans at 3.4%. Without intervention, the rate would have doubled, affecting more than 7.4 million students, who would have faced, on average, an additional $1,000 in debt.

Eventually, policymakers worked out a deal, and the lower rate remained in place, but it was temporary — on July 1 of this year, the rates are set to double again. Look over more:

3.  Chart of the Day: Student Loan Debt Crowding Out Mortgages:

A new report from the New York Fed describes a disturbing trend: student loan debt has increased so much that it's crowding out the ability of college graduates to buy homes. As the chart on the right shows, young workers with student loan debt—most of whom are college grads—used to take on mortgage debt at a higher rate than the rest of the population. This made sense, since they generally had higher incomes and better career prospects.  More Outline: Around The Web: