Survey: 1 in 5 households paying student loans

  HOPE YENWASHINGTON -- With college enrollment growing, student debt has stretched to a record number of U.S. households - nearly 1 in 5 - with the biggest burdens falling on the young and poor.

The analysis by the Pew Research Center found that 22.4 million households, or 19 percent, had college debt in 2010. That is double the share in 1989, and up from 15 percent in 2007, just prior to the recession - representing the biggest three-year increase in student debt in more than two decades.

The increase was driven by higher tuition costs as well as rising college enrollment during the economic downturn. The biggest jumps occurred in households at the two extremes of the income distribution. More well-off families are digging deeper into their pockets to pay for costly private colleges, while lower-income people in search of higher-wage jobs are enrolling in community colleges, public universities and other schools as a way to boost their resumes.

Because of the sluggish economy, fewer college students than before are able to settle into full-time careers immediately upon graduation, contributing to a jump in debt among lower-income households as the young adults take on part-time jobs or attend graduate school, according to Pew.

As a share of household income, the debt burden was the greatest for the poorest 20 percent of households, or those making less than $21,044. In all, 40 percent of U.S. households headed by someone younger than age 35 owed college debt, the highest share of any age group.

"Comparing the debt to their economic resources, the lowest-income fifth of households are the ones experiencing the greatest stresses," said Richard Fry, a senior economist at Pew who analyzed the numbers.

Noting that college enrollment has continued to climb since 2010, Fry added: "Until college enrollment peaks, I would not expect the amount of outstanding student debt to level off."

The study released Wednesday is based on the Survey of Consumer Finances, conducted every three years and sponsored by the Federal Reserve. The numbers are as of 2010, the latest available for that survey. Separate Fed data have pointed to subsequent increases in student loans since 2010 that totaled $914 billion in the April-June quarter, but don't provide demographic breakdowns on who shoulders the biggest burdens.

Both President Barack Obama and his Republican challenger in this year's election, Mitt Romney, have been seeking to court young voters with differing visions on how to address rising tuition and growing college debt. Obama wants to make tax credits for college expenses permanent and expand Pell grants for lower-earning families. Romney says that making government the direct source of federal student loans has not worked and simply drives tuition higher. He stresses the need to curb college costs.

The Pew report found that the richest 20 percent of households, or those with annual income of $97,586 or higher, owed the biggest share of outstanding student debt - 31 percent, up from 28 percent in 2007. The poorest 20 percent of households also saw their debt grow, to 13 percent from 11 percent.

The richest households saw significant increases in per-household debt. For those with annual income of $97,586 to $146,791, college debt rose from $25,921 in 2007 to $31,989. For the richest 10 percent, making at least $146,792, college debt increased from $36,033 to $44,810.

Across all households, the average outstanding college debt increased from $23,349 to $26,682. For the poorest 20 percent of households, the average debt rose from $19,018 to $20,640.

In recent years, Americans have cut back on several other types of borrowing such as credit card use, with average household indebtedness falling from $105,297 in 2007 to $100,720 in 2010. Broken down by income levels, however, average total indebtedness for the bottom 20 percent of households by income actually rose from $17,579 in 2007 to $26,779; for the higher income groups, average indebtedness either was unchanged or declined.

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Online: Pew Social & Demographic Trends

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Survey: Closing a bank account will cost you

  PALLAVI GOGOINEW YORK -- Want to close your bank account? It could cost you as much as $55.

In a survey of the practices of the 10 largest banks in the country - including JPMorgan Chase, Bank of America, Citibank and Wells Fargo - policy and advocacy group Consumers Union found that people who want to close their accounts at big banks and switch to a smaller bank can face costly obstacles.

"Banks have added all sorts of fees on basic checking accounts, which has raised alarm bells," said Suzanne Martindale, staff attorney for Consumers Union. "But when you hit breaking point and want to move your money, guess what you encounter: more fees."

Consumers Union said none of the 10 banks will make a free same-day electronic transfer, and all charge for wire transfers or certified checks. Certified checks can cost up to $10 and wire transfers $30.

BB&T and Citibank charge a $25 fee if the account is closed within 90 days, while US Bank, HSBC, and PNC Bank charge customers a $25 fee to close an account that has been open for fewer than 180 days.

The survey was commissioned after the public furor over Bank of America's plan to start charging its customers $5 for using debit cards. Bank of America backed off after many organizations, including Consumers Union and Occupy Wall Street protesters, called on Americans to transfer accounts from large banks into smaller community banks.

A survey of customers at the top 10 banks by consulting firm cg42 in November found that one in five customers actively considered switching accounts. Consumers Union said it soon started hearing from its members that wasn't easy: Not only did it cost money, but it also cost a lot of time.

Opening an account at another bank can take a few days or up to two weeks for all the paperwork to be completed. Re-routing automatic payments and direct deposits into a new account can take four to six weeks and can be a very intimidating and complicated process for some consumers, the group said.

Banks sometimes reopen old accounts after they have been closed by customers.

Chase reopens an account if the bank receives a deposit. Consumers Union said that could easily happen if a direct deposit isn't re-routed in a timely manner. Bank of America's policy is to reopen accounts if any activity hits the account.

Chicago business owner Mark Henderson said he closed his account about 18 months ago and kept receiving statements with a service charge every month saying there wasn't enough money in the account.

After calling several times and telling the bank's customer service representative that the account was closed, Henderson said, he gave up.

"Now I just tear the statement when it comes," Henderson said.

Bank of America spokeswoman Betty Riess wouldn't comment on Henderson's experience. She said the bank advises customers who are closing accounts to allow time for pending payments and deposits to clear the account.

"If we receive a deposit or credit to the account after it has been closed, we may re-open the account to accept the item, and the account could be subject to associated fees. We disclose this to customers," Riess said.

Consumers Union warns that customers can end up owing hundreds of dollars in penalty fees or even a monthly maintenance fee if a re-opened account falls below what is needed to avoid such a fee.

Consumers are at risk of more penalty fees after they switch banks. If merchants and other billers charge for late payments for delays while re-routing automatic payments, the previous bank may charge an overdraft fee on an empty account or for a bounced check.

The 10 banks surveyed are Bank of America, BB&T, Chase, Citibank, HSBC, PNC, SunTrust, TD Bank, US Bank and Wells Fargo.

As part of the study, the group sent 16 secret shoppers into branches around the country to ask how to close an account and reviewed online fee schedules and account disclosures, tracked news developments, and collected consumer stories.

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