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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BofA in $335M settlement over Countrywide loans

(AP Photo)

  Eyewitness NewsBy PALLAVI GOGOI and NEDRA PICKLER -- Bank of America has agreed to pay $335 million to resolve allegations that its Countrywide unit engaged in a widespread pattern of discrimination against qualified African-American and Hispanic borrowers.

The settlement with the U.S. Justice Department was filed Tuesday with the Central District court of California and is subject to court approval. The DOJ says it's the largest settlement in history over residential fair lending practices.

Charlotte, N.C.-based Bank of America Corp. bought the nation's largest subprime lender, Countrywide Financial Corp., in 2008.

The settlement amount will be used to compensate victims of Countrywide's discriminatory mortgage loans from 2004 through 2007.

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Chrysler to repay government loans Tuesday

  By TOM KRISHERMACOMB TOWNSHIP, Mich. -- Chrysler CEO Sergio Marchionne said Monday that his company will save $300 million in interest a year when it repays $7.5 billion in U.S. and Canadian government loans on Tuesday.

Chrysler plans to announce the repayment at a Detroit-area auto assembly plant on Tuesday afternoon. Ron Bloom, the Obama administration official who oversaw the restructuring of the auto industry, is among those scheduled to attend.

Marchionne has said that Chrysler is eager to pay back its loans in part because of the governments' high interest rates of around 12 percent, which cost the company $1.2 billion last year.

To pay back the loans, Chrysler is issuing $3.2 billion in bonds and taking out $4.3 billion in bank loans. It also will use a $1.3 billion investment from Italian automaker Fiat SpA. In exchange, Fiat will increase its ownership stake in Chrysler to 46 percent.

Under that refinancing deal, Chrysler's interest rates will fall to around 6 percent. That will boost the bottom line at the company. It reported a $116 million profit - its first quarterly profit since its 2009 bankruptcy - in the first quarter.

The company still owes the U.S. government $2 billion. The government could get some of that back by selling its 8.6 percent stake in Chrysler.

Marchionne, speaking at a grand opening celebration for a Fiat dealership in Macomb Township north of Detroit, said he hasn't discussed with the U.S. government how soon it will sell its stake in Chrysler.

Fiat, which has had management control of Chrysler since it emerged from bankruptcy protection in 2009, has an option to buy the government's shares.

The government also could sell them in an initial public stock offering.

Marchionne said he expects the government to get out of Chrysler as quickly as possible.

Marchionne said Fiat's stake in Chrysler will rise to 51 percent when Chrysler produces a 40 mpg car in the U.S. starting next year.

He said Fiat can raise its stake as high as 76 percent if it exercises all options, including buying part of the 59-percent stake now owned by a health care trust fund for union retirees.

Marchionne said the timing of a public stock offering depends on the needs of the trust fund.

Chrysler took $10.5 billion from the U.S. government to survive two years ago, and it has repaid some of the money. On Tuesday, it will retire a $5.9 billion balance on the U.S. loans and $1.6 billion to the governments of Canada and Ontario.

Chrysler's action is the latest in the long comeback of the Detroit auto industry after the recession put its future in doubt.

General Motors Co. got a $49.5 billion U.S. bailout in exchange for a 61 percent federal equity stake in the automaker after it emerged from bankruptcy protection. The Treasury Department now owns 26.5 percent of GM after selling part of the stake in November.

The third of the Detroit Three, Ford Motor Co., didn't seek a bailout.

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