Friday , 1 December 2023

Student Loans: the Situation; the Problems; the Solution

Data from Barclays Research clearly shows that the strain on US consumers fromdebt student loans isn’t going to improve any time soon and that the risk to the taxpayers is on the rise.

So writes Walter Kurtz ( in edited excerpts from his original article* entitled The US Student Loan Problem – Facts, Charts, &  Thoughts.

[The following article is presented by  Lorimer Wilson, editor of and and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]

Kurtz goes on to say:

Let’s take a look at where we stand with the overall student loan problem and how we could move forward. Here are six facts to consider:

1. There is about a trillion dollars worth of student loans outstanding with all but 15% of that owned or guaranteed by the federal government. The chart  below shows the student loan amount held directly by the federal government.  That balance is rising at about $110 bn per year.

Student loan balances


2. Higher education still provides a clear financial advantage, with the  unemployment rate among college graduates at about half that of those with just  a high school diploma. However when you add student loans into the mix, the  financial situation of graduates is not as compelling. For example, while  homeownership has declined across the board, the decline has been much sharper  for those with student loans.

30year-olds with and without student loans that have mortgage debt


3. Not surprisingly, since 2008, the credit score of young people with  student loans increasingly lags the score of those without this type of  liability.

Credit Scores


4. Based on the expected repayment schedule of outstanding student debt, an  increasingly large volume of loans is forecast to be repaid each year yet, since  2007, the actual repayments keep falling further behind the repayment  expectations. Based in this trend, the situation for 2013 looks a bit scary.

Expected loan repayments vs actual


5. Student loans now have the highest delinquency rate among all major  consumer credit asset classes. Based on the latest data, the trend isn’t  encouraging.



6. While there is a perception that student loan delinquencies are limited to  generation-Y borrowers, delinquencies are rising across all ages.

Student Loan delinquencies by age



The data clearly shows that the risk to the taxpayers is on the rise and the  strain on US consumers from student loans isn’t going to improve any time soon.

  • The unlimited availability of student loans has allowed colleges to sharply  raise tuition and fees over the past few years – often simply because they could.
  • Rising cost for higher education in turn forced students to take out larger loans and in greater numbers, increasing the  overall loan balances. This feedback loop is clearly unsustainable, particularly  as household income growth remains weak.
  • Higher delinquencies are inevitable and, as long as the government funds this program, there really is only one way to  arrest rising levels of student debt…The taxpayers funding this program should insist that if a college  accepts over a certain percentage of students paying with federally backed  student loans, that college must agree to cap tuition and fees.

It’s time for  institutions of higher learning to start living by the concept of “chained CPI”  rather than to just keep writing research papers on it.

[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]

* (Content copyright 2009-2013. All rights reserved.)

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