Weekly Round Up – May 15, 2014

Get out of debt text magnified on whiteBefore we get to the good reads!

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A Few Good Reads

Here are a few of my favorite reads from the past week.

1. Young Adults, Student Debt and Economic Well-Being: 

Student debt burdens are weighing on the economic fortunes of younger Americans, as households headed by young adults owing student debt lag far behind their peers in terms of wealth accumulation, according to a new Pew Research Center analysis of government data. About four-in-ten U.S. households (37%) headed by an adult younger than 40 currently have some student debt—the highest share on record, with the median outstanding student debt load standing at about $13,ooo.

An analysis of the most recent Survey of Consumer Finances finds that households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700). And the wealth gap is also large for households headed by young adults without a bachelor’s degree: Those with no student debt have accumulated roughly nine times as much wealth as debtor households ($10,900 vs. $1,200). This is true despite the fact that debtors and non-debtors have nearly identical household incomes in each group. Read full post

2. Debt Forgiveness: How to Get Out of Paying Your Student Loans: 

With student loan figures soaring, debt-saddled students and graduates are desperate for any strategy that may help them escape their burden. For many, the prospect of debt forgiveness may seem like a dream come true. In reality, only some borrowers may be eligible for forgiveness – and their window of opportunity may be closing.

Earning Debt Forgiveness

Student loan forgiveness can be earned in two ways: by working in public service or by making payments through income-contingent payment plans for a (long) period of time. Each has its own conditions, requirements and limitations. Neither route is quick or easy.

Still, borrowers have rushed to get on board. According to figures released by the Department of Education, there are currently more than 2.2 million Americans enrolled in income-based repayment plans that offer a chance of forgiveness. These borrowers account for a total outstanding debt of more than $108 billion. Read full post

3. Higher debt, fewer delinquencies:

Household debt — driven by outstanding mortgages — has been increasing for three quarters in a row, but delinquency rates are at their lowest level since 2008, according to the Federal Reserve Bank of New York.

steps-to-refinance-mortgage-lgOverall, household debt increased by $129 billion from fourth quarter last year, with $116 billion of that gain coming from mortgage debt. As of March 31, total household debt stood at $11.65 trillion; mortgage liabilities at $8.17 trillion. Total debt peaked in the third quarter of 2008 at $12.68 trillion.

Fewer new foreclosures:

The good news from the New York Fed is that 12,000 fewer individuals had foreclosure notations added to their credit reports in the first quarter compared with the previous quarter.

New foreclosures have been dropping steadily since 2008 and at their lowest level since early 2003. Read full post

4. Canadian Tire downgraded as REIT debt doesn’t support valuation: 

Canadian Tire Corp. was downgraded to underperform from neutral by Credit Suisse analyst David Hartley, who believes new segmented financial data should include the debt at the company’s REIT.

He pointed to figures that show Canadian Tire’s retail segment would have net cash of $1.5-billion, as opposed to net debt of $684-million, not including proceeds from the sale of its financial services business to Scotiabank.

However, Mr. Hartley believes this segmentation is inappropriate from a stock valuation perspective, telling clients that since Canadian Tire controls CT REIT, the effective value of debt held at the retail business doesn’t change. Read full post

5. College-Educated Consumers With Student Debt Have Median Net Worth Of Just $8,700:

It’s no surprise that most college graduates leave with a degree and an excessive amount of student debt. But what was once promoted as a gateway to a better life has left graduates under 40 with lower accumulated wealth and a lower level of satisfaction in their financial situation.

A new Pew Research report “Young Adults, Student Debt and Economic Well-Being” examines just how college debt affects the overall wealth of consumers and why having a degree, despite the debt associated, is still better in the long run.

Nearly four-in-ten U.S. households headed by an adult younger than 40 currently have student debt and a median net worth of just $8,700. Read full post

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