10 Scary Facts About Student Loans That Will Depress You
Despite advanced teaching and communication technology, education is getting more expensive. While a Baby Boomer may have been able to earn and pay for a college degree while working part-time, recent graduates are saddled with huge debt loads. In fact, student debt for many individuals can be sometimes insurmountable.
Republicans and Democrats have been scrambling in Washington, D.C. for years to figure out a solution, all to no avail. The congressional push and pull has yielded no real results for dealing with the student loan bubble, and while the theatrics have been ongoing, the bubble has grown. There is now roughly $1.2 trillion in outstanding student debt in the U.S. — more than all credit card debt. Only mortgage debt outranks student debt.
It’s a scary prospect for students as their college education costs continue to skyrocket, and their degrees show smaller certainties of payoff. Even as the economy improved over the Obama years, well-paying entry-level jobs have continued to remain scarce for recent graduates.
And skipping college is becoming a riskier decision. A report by the New York Times found that even manufacturing and factory jobs — jobs that used to be ubiquitous and easy to get with a high school diploma — now require a college degree. For today’s graduates, it’s a much different world than the one their parents and grandparents dealt with.
Dwell on it enough, and you’re likely to get depressed. Here are 10 facts about student loans that will only compound that depression.
1. The class of 2016 owes an average of $37,173
The class of 2016 has it worse than any of those before it. Graduates have an average debt load of more than $37,000, which actually represents a rise of more than 6% year-over-year. There is good news, though — salaries and pay are starting to rise again.
2. Student debt tripled between 2004 and 2013
Another bleak reality: even though U.S. consumers are slowly working their way out of debt, students are being faced with a different type of phenomenon. From 2004 to 2013, consumer debt posted only a modest growth of 9%, while student debt actually tripled to $986 billion over that same time period.
3. 45% of 25-year-olds hold student debt
Once these students graduate, the troubles begin to mount. By some measures, more than 40% of 25-year-olds hold student debt. That figure has gone up sharply from the early 2000s. There are a lot of reasons that this has happened, including the Great Recession. But costs have continued to rise, and jobs have become harder to get. All told, it means more students are carrying student debt.
4. About 11% of loans are delinquent
Another problem is that these loans fall into delinquency. About 11% of loans were delinquent at the end of last year. When only loans in repayment are considered (excluding those that have been deferred for one reason or another), about one-third are delinquent. Young people acknowledge that they need more information about delinquency and default, and cite that they didn’t fully understand the contract they were signing — another, albeit related, issue.
5. Borrowers are moving to delinquency from repayment
Another contributing component that isn’t helping matters is the fact that the quarterly movement of borrowers from repayment to delinquency has accelerated. Recent reports, including one from the Wall Street Journal, say that as many as 40% of borrowers have simply stopped making payments.
6. The burden compounds with age
When it comes to student debt, time heals nothing. In fact, it’s going to exacerbate the issue. As of early 2012, borrowers in their 30s have a delinquency rate (meaning, they’re more than 90 days past due) of about 6%. Borrowers in their 40s have a delinquency rate that’s double that, at about 12%. Borrowers in their 50s have a delinquency rate of 9.4%, and those over 60 have a delinquency rate of 9.5%.
7. More than $3,000 in loan debt is accrued every second
The total outstanding student debt in the U.S. now totals more than $1.2 trillion. And according to Debt.org, it’s growing at a rate of roughly $3,000 every second. Don’t expect that number to start slowing down (or falling) anytime soon.
8. Taxpayers are on the hook for $108 billion (so far)
Not all student loans are going to be paid back. But that money has already been spent, and taxpayers are ultimately on the hook for it. Recent reports say that there’s around $108 billion that’s not going to be paid back, and that number is expected to only increase with time.
9. The average monthly payment is $351
According to data from Student Loan Hero, borrowers between the ages of 20 and 30 make an average monthly payment of $351. For some, that may not sound like a lot — for others, it blows a crater in their monthly budget. Most millennials aren’t flush with cash, so a substantial monthly payment (that they’re shackled to for the long-term) can make it hard to save and plan for the future.
10. There’s no plan on the table to help
With a new administration in the White House, the hope is that some sort of plan for dealing with the student debt crisis will emerge. Trump has floated some ideas, but there really isn’t a serious plan for tackling the problem. That’s not to say things couldn’t change. Still, the government has seen this problem creeping up for many years now and has failed to act on it. No matter what happens, it’s going to be ugly and expensive.