The trillion dollar question: When my salary is financed by student debt ...?

Not a new topic in this blog, and yet the following graphic (ht) made me pause and think:

Of course, since that 2011 Q3, the amount has crossed the one trillion dollar mark.  It is one thing if a medical school student takes on a $100,000 debt, because of the potential earnings.  But:

individuals risk being over their head when their loan debt exceeds their annual income. Take a former student with a $50,000 debt with a $40,000 income. While the future interest rate on student loans is uncertain let us assume one of 5 percent, lower than what the law for the next fiscal year requires but more than President Obama wants. A person with a $40,000 income might have only $28,000 of what the Feds define as discretionary income. Devoting 10 percent of that income to debt servicing (the maximum required under an executive order), a debtor would pay $2,800 annually in debt service, $2,500 of which would go for interest, and only $300 for principal. Since federal policy puts a 20-year time limit on repayment, and it is likely it might take more than 20 years to repay the loan, it likely will never be fully repaid—the government will take a hit. When the debt-income ratio is under one, that is much less likely to occur. My wife, a retired guidance counselor, talked to a former student of hers recently with a six-digit debt incurred while in undergraduate and law school that is perhaps three times her income, and she literally has health problems from worrying about the crushing burden. This is not rare these days.

Scary!

Even scarier? Like this:

According to the College Board’s 2011 Trends in Student Aid report, 13 percent of people who started at a four-year institution in 2003-04 but did not complete their bachelor’s degree by 2009 have more than $28,000 in student loan debt.
For some, the debt burden can be far worse. Jim VanNest, 30, has been struggling with more than $100,000 in student loan debt since he dropped out of Boston’s Berklee College of Music in 2005, where he had been studying voice and audio engineering for three years. Since then, he has worked as a customer service representative for a telecom company, a receptionist, a janitor, and “hit a low point” when he got a job at Petco.

 Not looking good .... :(