In the aftermath of the stock market failure of 2008, another type of economic bubble is swelling: student debt. And it’s no surprise, since Congress has done nothing to change the lending practices that brought the U.S. to the brink three years ago.
The social statistics on the debt are appearing in financial journals and in the work being published by economic research groups. According to Rep. Hansen Clarke, D-Mich., in 2010, “the average borrower graduating from a four-year college left school with roughly $24,000 of student debt, despite the grim statistic that—according to a Rutgers University study—only 56 percent of 2010 graduates were able to find work following completion of their studies.” In July, credit rating firm Moody’s Analytics warned that student debt could lead to the next financial crisis.
The stories of a number of former students and more urgent figures appear in the article below. —ARK
A recent piece in the Atlantic noted that student debt has grown by 511 percent since 1999. At that time, only $90 billion in student loans were outstanding—by the second quarter of 2011, that balance was up to $550 billion, according to the New York Fed. And the Department of Education estimates that outstanding loans total closer to $805 billion—and that number will pass $1 trillion soon.
As student loans rise, so has delinquency. Phil Izzo at the Wall Street Journal reported that 11.2 percent of student loans were more than 90 days past due and that rate was steadily going up. “Only credit cards had a higher rate of delinquency — 12.2 percent — but those numbers have been on a steady decline for the past four quarters,” he noted.
It shouldn’t be surprising to anyone that student loan defaults are going up as young workers especially are struggling in the current economy. Izzo reported, “Workers between 20 and 24 years old have a 14.6 percent unemployment rate, compared to the national average of 9.1 percent recorded in July. That comes even as the share of 20- to 24-year-olds who are working or looking for a job is at the lowest level since the 1970s, before women entered the labor force en masse.”