Student loan defaults are skyrocketing as years of shoddy lending standards mix with a sluggish job market to create a perfect financial storm:

WASHINGTON (Reuters) – Banks wrote off $3 billion of student loan debt in the first two months of 2013, up more than 36 percent from the year-ago period, as many graduates remain jobless, underemployed or cash-strapped in a slow U.S. economic recovery, an Equifax study showed.

The credit reporting agency also said Monday that student lending has grown from last year because more people are going back to school and the cost of higher education has risen.

“Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs,” Equifax Chief Economist Amy Crews Cutts said in a statement.

The student lending bubble is something we’ve written a lot about over the last couple years here at The College Fix. Now, it seems, things are getting even worse.

Read more at the Chicago Tribune.

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(via Drudge)

When I read this story, I suddenly became grateful. You see, I used my book advance from Sex & God at Yale to pay off my student loans. Turns out I was very fortunate–more so than some of my fellow low-income graduates, apparently.

Yale University may have an endowment in excess of $20 billion, but that hasn’t stopped it from suing some of its poorest graduates for unpaid student loans.

Bloomberg News reports:

Needy U.S. borrowers are defaulting on almost $1 billion in federal student loans earmarked for the poor, leaving schools such as Yale University and the University of Pennsylvania with little choice except to sue their graduates.

The record defaults on federal Perkins loans may jeopardize the prospects of current students since they are part of a revolving fund that colleges give to students who show extraordinary financial hardship.

Yale University is among colleges suing former students for defaulted Perkins loans, which are earmarked for students with extraordinary financial hardship, court records show.

Yale, Penn and George Washington University have all sued former students over nonpayment, court records show. While no one tracks the number of lawsuits, students defaulted on $964 million in Perkins loans in the year ended June 2011, 20 percent more than five years earlier, government data show. Unlike most student loans — distributed and collected by the federal government — Perkins loans are administered by colleges, which use repayment money to lend to other poor students.

“If you borrow to go to school, it may not be just the government that ends up coming after you if you can’t pay,” said Deanne Loonin, an attorney with the National Consumer Law Center, a nonprofit advocacy group in Boston. “We offer credit very easily.” If the student doesn’t benefit financially from the education, “the government or the school comes after them very aggressively.”

Debts must be repaid. That’s certain. And Yale has a legal right to sue for repayment. But I’m surprised to read about a proudly progressive, wealthy university like Yale going after low-income graduates so aggressively. Aren’t you?

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