U.S. Student Loan Debt Sets Record, Doubling Since Recession
There’s more bad news about student loans, which hit a new record of nearly $1.5 trillion.
One trillion has 12 zeros — a million millions. Multiply that by 1.5. A Bloomberg analysis of student loan securitization data found that most borrowers are having a hard time paying back their debt. This, of course, is a burden on the U.S. economy.
Listen to GHOGH with Jamarlin Martin | Episode 39: Tunde Ogunlana
Jamarlin talks to family wealth advisor Tunde Ogunlana, CEO of Axial Family Advisors, about estate planning and Snoop Dogg’s comment that he doesn’t need a will (“I don’t give a f— when I’m dead. What am I gonna give a f— about?”). They also discuss the growing college debt bubble, whether more free tuition will help solve the problem, and why MBAs are like the bachelor’s degrees of 30 years ago.
More than 90 percent of student loans are guaranteed by the U.S. Department of Education. If a recession causes a rise in youth unemployment and triggers mass defaults, this contingent liability could burden the U.S. government budget, said Paul Della Guardia, an economist at the Institute of International Finance, in a Bloomberg interview.
This new debt is more than double the $675 billion that was due in June 2009 following the recession.
Student loan borrowers are finding it hard to keep up with their payments in every age group.
“A large percentage of those who took out loans in 2012 are currently 24-33 years old, an age where many are generally establishing themselves in their careers. Borrowers in this group entered the labor force when the unemployment rate was twice as high as today and may have found it difficult to find a career track in their desired field. Further adding to the difficulties faced by this group was that finding a position in 2012 took almost three times longer than today, according to data from the Bureau of Labor Statistics,” Bloomberg reported.
One of the problems is the high-interest rates these loans were borrowed at. This has caused the debt to pile up. More than 2.7 million borrowers owe $100,000-plus. “Borrowers in the 25-34 age group owed $489 billion as of the third quarter, slightly less than $530 billion balance for 35 to 49-year-olds,” Bloomberg reported.
And at the end of September, 1.8 million borrowers age 62 and older owed $62.5 billion in federal student loans. People age 50 to 61 carried a student loan debt of $213.6 billion.
Dan Mitchell, Center for Freedom & Prosperity co-founder, blames the government for enabling tuition to climb sharply at colleges and universities.
More than 44 million Americans take out student loans and 2.7 million-plus borrowers owe in excess of $100,000, according to the U.S. Department of Education.