Must Read: Student Loans Weighing Down a Generation With Heavy Debt

May 15, 2012 9:38 am

This weekend, the NY Times did an extensive review of the college debt burden that is growing exponentially.It comes at an interesting time when the unemployment rate of under 25 is still close to record highs and the vote to extend the low cost loans is hanging overhead.

Something is going to have to give or we are strolling down a path toward sure financial death debt overload as a country. But we already know that.

The graphics with this article are really eye opening.

Here is a snippet, but check out the interactive parts as well.

But even if student loans are what many economists consider “good debt,” an increasing number of borrowers are struggling to pay them off, and in the process becoming mired in a financial morass.

Education Department data shows that payments are being made on just 38 percent of the balance of federal student loans, down from 46 percent five years ago. The balances are unpaid because the borrowers are still in school, have postponed payments or have stopped paying altogether.

Nearly one in 10 borrowers who started repayment in 2009 defaulted within two years, the latest data available — about double the rate in 2005.

Economists do not predict a collapse of the student loan system, which would, in essence, mean wholesale default. And if there were one, it would be unlikely to ripple through the economy with the same devastating impact as the mortgage crash. Though now larger than credit card and other consumer debt, the student loan balance remains smaller than the mortgage market, and most student loans are issued by the federal government, meaning banks wouldn’t be affected as much.

Still, economists say, growing student debt hangs over the economic recovery like a dark cloud for a generation of college graduates and indebted dropouts. A study of recent college graduates conducted by researchers at Rutgers University and released last week found that 40 percent of the participants had delayed making a major purchase, like a home or car, because of college debt, while slightly more than a quarter had put off continuing their education or had moved in with relatives to save money. Roughly half of the surveyed graduates had a full-time job.

 

FULL ARTICLE

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