Student Loan Defaults Rising, Hurting Recovery
Student loan debt continues to burden education-seekers and degree-holders in the US. Not only that, but those debts have only grown in recent years. An average student in 2012 owed about $29,400 in student loan debts. That’s a whopping 25 percent growth from just four years earlier. Collectively, Americans owe nearly $1 trillion to their student loans.
Think that’s bad news? It gets worse. Americans facing such an enormous student loan debt burden are increasingly defaulting. The Federal Reserve Bank found that in 2013 more than one in ten student loans were considered “delinquent” — no payment made within the last 90 days — a large increase over 7.6 percent delinquent loans a mere five years earlier.
Data from the Department of Education agrees. It finds that ten percent of the student loans due in 2011 ended up in default. Compare these numbers to five years before, when 6.7 percent of student loans were defaulted on.
Worse still, the number of people saddled with student loan debt with no degree to show for it is rising. Rising costs of higher education, coupled with vanishing financial assistance like Pell grants, are putting the squeeze on middle-class students and students from low-income families.
A large number of these college-goers face a full-time school schedule, yet must work to make ends meet. Unfortunately, this financial pressure appears to be pushing an ever higher number of would-be graduates out of the classroom. Many of them are then left with crippling student loan debt, often unable to make regular payments. As the data shows, a growing number of people in these circumstances fall into default eventually.
While a combined debt of around $1 trillion in US student loans may sound like a lot, economists don’t believe it is a major threat to the economy. Still, problematic student loans work against the US economic recovery — not only burdening a number of young American adults financially, but for the growing number of people forced to default and face damaged credit.
