According to the Wall Street Journal and data compiled by analyst Mark Kantrowitz, the average loan-holding 2014 college graduate will have to pay back $33,000. That’s up from around $31,000 in 2013 and under $10,000 in 1993:
Image Credit: Mark Kantrowitz/Wall Street Journal
The chart above reveals that the average student loan debt has increased every year for at least the past two decades. Not only is the average student loan debt increasing, but since 1993 (as shown in the image below), the percentage of students taking out loans for college has risen from around 46% to 70%.
Image Credit: Mark Kantrowitz/Wall Street Journal
According to CNBC:
Student debt is the only kind of household debt that rose through the Great Recession and now totals more than either credit card or auto loan debt, according to the Federal Reserve Bank of New York. Both the number of borrowers and amount borrowed ballooned by 70 percent from 2004 to 2012.
This has seen outstanding student debt rise to more than $1 trillion.
So why does this matter?
A recent paper by Barclays stated:
- The growth of federal student loans outstanding in the past decade ($583 billion) is larger than the bank bailout package ($431 billion).
- A larger portion of the student loan debt is falling on those who will not receive the financial benefits of earning a degree. Borrowers who graduated had a default rate of 3.7% in 2009, while those who dropped out had a default rate of 16.8%.
- Barely half of all borrowers were making payments as of the third quarter of 2011; 47% were either still in school or in deferral, forbearance or grace periods.
- Given the weak labor market and increasing dropout rates, there is little reason to think that future delinquency rates will be lower than the current national average (14%).
- When combined with forecast growth in issuance, we estimate that the government will lose around $65 [billion] on student loans in the coming decade from subsidy rate re-estimates alone.
- Between now and 2020, we think that IBR [the new income-based repayment programs] will cost the government a total of $190 [billion, due to write-offs].
In short, the debt first hobbles the graduates, and then the economy as a whole.
The $1trn student debt has been described as an economic time bomb set to explode in coming decades just as the sub-prime mortgage crisis did in 2001/8, as these over-burdened graduates fail to pay down their loans.
While the US government continues to blow its budget on moronic multi-billion dollar investments, including its massive prison system and the trillion dollar F-35 fighter jet program – colleges continue to hike up tuition fees beyond all reason. In allowing such a state of affairs to continue at ever increasing scale, the US is cannibalizing its own economy.
