Student Loans Balances Up Dramatically Over Past 20 Years



Student loan debt - Illustration / drawing - Female graduate with ball and chain.The good news? While total household debt continues to creep back towards pre-Great Recession levels, the percentage of mortgage debt vs household debt is significantly lower than it was in the run-up to 2008.

The bad news? Student loan debt continues to ramp up, which will have a significant impact on the economy as millennials leave college.

According to the Federal Reserve, student loan balances sat at $1.3 trillion at the end of 2016. To put this into perspective, student loan debt sat at $363 billion in the end of the first quarter of 2005.

As you can imagine, the number of former students who are over 90 days delinquent has also risen in recent years.

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Many smart people think that rising student loan debt is one of the most serious problems that the United States currently faces.

After all, with students burdened with increasing amounts of debt after leaving college or university, this significantly impairs their chances to buy a house or contribute to the economy through the spending of their earnings. The bottom line is that many with student loan debt have to significantly scale back their spending in order to stay on top of their payments.

Many colleges and universities have increased their costs significantly over the past decade or two, as less funding is made available from government sources. In addition, the cost of textbooks have been on a constant rise, and the cost of living has increased significantly for students as well.

Despite a dropping unemployment rate, many students are having trouble finding part-time work during the school year or full-time work during their time off. This results in a larger student loan burden, as many students have to borrow to pay the bills.

In addition, the Bank of Mom and Dad have been slamming their doors shut as well in recent years, despite the climb in the stock market and the rebound in home prices.

All of these things have conspired to increase the debt burden of millennials as they leave college, with the average graduating student leaving with well over $30,000 in student loan debt.

This will leave the economy in an interesting spot going forward if trends don't reverse, as the country will be depending on these increasingly indebted graduates to keep the economy afloat.

Filed under: General Knowledge

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