Student Loans Swallowing America

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For years, young people in America have been told that if they fail to get a good college education, they will miss out on many of the opportunities given to their more-educated peers. There’s another thing they may be missing out on: about $1 trillion in Federal student loan debt.

A report released last week by Barclays indicates that the official estimates of the future burden of student loan debt have been understated to the tune of at least $225 billion. The Federal Reserve estimated the total to be at least $870 billion as of 2011.

Here are some points Barclays makes about the debt, referencing the Federal Reserve and the National Center for Education Statistics:

  • The growth of federal student loans outstanding in the past decade ($583 billion) is larger than the size of the government’s TARP bailout package ($431 billion).
  • Borrowers who graduated had a default rate of 3.7 percent in 2009, while those who dropped out had a default rate of 16.8 percent, and … a larger portion of the student loan debt is falling on those who will not receive the financial benefits of earning a degree.
  • Barely half of all borrowers were making payments as of the third quarter of 2011; 47 percent 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 percent for all borrowers).
  • Currently, 15.5 percent of the outstanding student loan balance is held by borrowers 50 and older, and 4.2 percent is held by those 60 and older; and these age cohorts hold an even larger share (16.9 percent and 4.8 percent respectively) of the total past-due student loan balance. The average debt burden for borrowers over age 60 is $18,250.
  • The median education debt belonging to households in which the head of the household is retired increased by 62 percent between 2007 and 2009.
  • 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].

By the looks of these statistics, it may be a ripe time for American students to better weigh the risks of incurring large sums of debt with the promise of better future employment to offset the investment cost.

Personal Liberty

Sam Rolley

Sam Rolley began a career in journalism working for a small town newspaper while seeking a B.A. in English. After covering community news and politics, Rolley took a position at Personal Liberty Media Group where could better hone his focus on his true passions: national politics and liberty issues. In his daily columns and reports, Rolley works to help readers understand which lies are perpetuated by the mainstream media and to stay on top of issues ignored by more conventional media outlets.

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