Student Loan Debt is a Growing Problem in the United States
According to the Federal Reserve Bank of New York, a full 27% of student loan borrowers that are in the repayment cycle are currently delinquent.
The NY Fed estimates that there are currently 20 million borrowers in the United States that are in the repayment cycle for their outstanding student loans. Of the 20 million borrowers, more than 5 million have a past due balance.
The subject of outstanding student loans in the United States has been receiving more attention in the past few weeks after a report was released by the CFPB (Consumer Financial Protection Bureau) that estimated that outstanding student loan debt likely topped the one trillion mark "several months ago". This means that outstanding student loan debt easily tops outstanding credit card debt ($700 billion) and total outstanding auto loan debt ($730 billion).
According to the NY Fed, the total past due balance of the 5.4 million borrowers who are currently delinquent represents a total past due balance of $85 billion.
The 30-39 age group represents the largest chunk of this total (34.2%). These are the borrowers who are mostly long past the deferal/forebearance periods.
The high national unemployment rate is having an adverse impact on the ability of many to pay their outstanding student loan obligations in a timely manner. Millions and millions of people are battling for the same jobs, and this has resulted in many college educated people being left to watch from the sidelines.
With so many former students struggling to pay off their student loan debts, a key segment of the population is unable to buy their first homes or automobiles, which is helping to have a dragging effect on the economy. As a matter of fact, many college graduates are being forced to move back in with their parents.
Many recent college graduates entered into postsecondary education when the economy was doing great, and are now left to fend for themselves in a significantly tougher time. Many recent graduates are quickly coming to the realization that a degree doesn't guarantee a high-paying job after graduation (or even any job, for that matter).
The really scary thing? Outstanding student loan debt will likely continue to spike over the coming years, thanks to increasing tuition rates and a raft of other reasons.
In previous generations, the life path for many was fairly straightforward - high school -> college -> job/house/kids. Now, in an ever-changing world, many are realizing that the path that was taken by their parents may now be overgrown and another path is now necessary.
Source: Federal Reserve Bank of New York - Grading Student Loans
Filed under: General Knowledge