There is a great divide on how much student loan debt is out there in the U.S. The mainstream media (MSM) is quoting an annual outstanding average of approximately $1.5 trillion ($1,465.3373 billion). If you wander over to the Federal Reserve Economic Data (FRED) portal and pull up the annual sum of Student Loans Owned and Securitized, Outstanding (SLOAS), the number is actually $5.9 trillion ($5,861.3491 billion), rounded off for good measure. Yes, that is TRILLIONS. Does it not just give you a warm, fuzzy feeling all over? What is the number the MSM tosses around on the value of subprime mortgages going into the financial crisis? Hey, at least there was a house for collateral, but this debt bomb is backed only by a diploma and debt servitude.
US student debt might lead to the next financial crisis… “By contrast, in March 2007, in the lead-up to the financial crisis, the value of subprime mortgages was estimated at $1.3 trillion.” – NYPost, Sep. 22
Here is a nice, colorful graph provided by CNBC with loan balance percentages broken down by age group.
Despite the economic recovery, student debtors’ ‘monster in the closet’ has only worsened… “40% of borrowers are expected to fall behind on their loans by 2023… Daniel Strong and his wife owe more than $350,000 for their bachelor’s and master’s degrees. ‘The huge monster in the closet for me are these student loans that keep getting bigger and bigger.’ When they graduated, they were faced with monthly bills of around $800 each and have since struggled to keep up. ‘It’s so stressful to think about the fact that you’re probably going to have to work until you drop dead at work because of your student loans,’ Strong said.” – CNBC, Sep. 22
A new report shows that the average student debt for graduates is climbing, but at a slower pace over the last couple years, according to the Institute for College Access & Success (ICAS). Nationally, 65% of 2017 college graduates had student loan debt, with an average owed of about $30k, which is 1% higher than 2016. Approximately 15% of the class of 2017 included non-federal loans, and those loans provide fewer consumer protections and payment options than a federal student loan, and the terms are typically at a much higher cost. It is important to note that colleges are not required to report debt levels of their graduates, so the ICAS report relied on, in part, voluntary numbers provided by 1,020 colleges, about half of the U.S. four-year non-profit colleges. ICAS also used data from the National Postsecondary Student Aid Study, and that report counts all borrowing and is released once every four years. The report does not include debt at for-profit colleges.
A new report released on Sep. 13, 2018 from AARP and the Association of Young Americans (AYA) concluded that more than 33% of millennials and baby boomers are unable to buy a home due to the difficulty of affording that debt. 24% of Gen Xers are unable to buy a car because of their student loan debt obligations.
“’The trillion dollar student loan crisis is clearly having a tangible impact on all Americans across all generations,’ said AYA Founder Ben Brown. ‘The impacts of this crisis have deep consequences on our economy as a whole, with the majority of Americans noting that student loan debt has been a barrier in making key life decisions and planning for the future. AYA teamed up with AARP on this research to better understand that impact and how young and older Americans can come together on calling for a higher education system that works better for us all.’
A large portion of the total student loan debt outstanding is unlikely to ever be repaid, as almost 25% are already in a state of delinquency or default. According to a new survey by NeighborWorks America, folks with student loans to pay off are putting off the purchase of a home and worry about it all the time. Student loan debt ballooned 130% since 2008, and millennials are taking the biggest hit. With the U.S. population teetering on the edge of a consumer debt cliff and the inability to afford the purchase of a home, car, or launch small businesses and the level of savings or emergency funds in the toilet, it is fanciful to believe we are not headed for another crisis that will eclipse the Great Financial Crisis.
Here is my message to any college-bound folks who have not already sunk their debt ship and are on the highway of their future driving a politically-correct Prius with no need to beat the Joneses. There is no magic bullet for free stuff, despite the Democratic Socialists of America (DSA) attempting to convince you that such a plan is even remotely possible, as it simply transfers the debt elsewhere and eventually back to you. Yes, college is getting more expensive, but there is a solid method to the madness of affordability. Thirty years ago, *cough cough*, I did exactly what this wise young man is advising today.
STOP Borrowing Money To Go To College! – Anthony O’Neal