Outstanding Student Loans Exceed $1 Trillion
With students needing a college education and workers seeking retraining both hoping to land a decent job, the amount of student loans taken out last year passed $100 billion for the first time last year and total outstanding loans are to exceed $1 trillion this year according to the Federal Reserve Bank of New York.
Higher education seekers are borrowing twice what they were ten years ago and the total outstanding debt has doubled in the last five years. The trend of Americans reducing what is owed on credit cards and home loans is going in reverse with student loans.
Unlike mortgages and credit cards, however, this debt cannot be shed in bankruptcy. Congress has given lenders (including the government) broad collection powers making these loans less likely to be bailed out from defaults.
The problem ahead lies in the economic impact these loans will make on the rest of the economy. New car sales, home sales and other life-cycle events will be delayed as borrowers work to pay off these non-dischargeable loans.
The number of defaults has risen 2.1% in the past two recorded years with the highest number of defaults (over nine months behind on payments) stemming from the rise in for-profit, online schools like the University of Phoenix, which gets 88% of its revenue from federal student loans.
