A whie back I wrote about the coming student loan crisis. Here is an update on that issue…
Student loans now have the highest rate of delinquency of any form of debt – 11.5% is 90 days or more late. The balance due has grown to $1.08 trillion!
While delinquency rates for mortgages, auto loans, second mortgages and credit cards all began dropping in 2010, student loan delinquencies continue to climb.
According to FICO, The average student loan has grown $17,233 in 2005, to $27,253 in 2012–a 58% increase in just seven years.
“There are several reasons for the rising student debt problem. The rising cost of education is certainly one of them, but the relationship between lender and student borrower is particularly troubling.
Students without much of a credit score or credit history are being approved for thousands of dollars in loans by lenders who are betting they’ll be able to pay it back after getting a college degree.” according to Forbes. click here for the full article.
When they graduate into a high-unemployment economy, IF they can get a job, it is below their skill level and doesn’t pay enough to pay back the loans: one-third of millennials say they would have been better off working, instead of going to college and paying tuition.
The result? they delay other life purchases, like new cars and homes (home ownership is 36% lower in those paying back student loans). And student loans cannot be escaped by bankruptcy – and all of this has a significant imact on the economy.
Some regulators are starting to pay attention. The Consumer Financial Protection Bureau says it’s received over 30,000 complaints and comments about how student loans are affecting consumers. CFPB Director Richard Cordray compared the student loan environment to the “broken mortgage market before the crisis” and said his agency is watching it closely.
“The burden of student debt is jeopardizing the ability of young Americans to buy homes, start small businesses, and save for the future,” said CFPB Director Richard Cordrayn last month.