Student Debt Bubble

by Dan Rather on August 5, 2011

Graphic for Student Debt

Crushing Student Debt

In as much as I don’t like being gloomy and spreading bad vibe to everyone around me, this really got me to a new low. With the way things are going there seems like there’s nothing to smile about. With student loan debt getting higher and higher each and every year as figures provided by the Federal Reserve Bank of New York show. They state that since 1999, the outstanding student loan debt has grown by more than 511 per cent. Wow! That is quite a large percentage. Over the same period, all other household debt in America – sun total of all credit card bills, all auto loans, and even all mortgage debt assumed during the great housing boom and bust that triggered the financial crisis grew by about a hundred per cent. Tell me you read that and felt sick to your stomach.

Rising by a whooping hundred billion every year, outstanding student loan debt has now become a macroeconomic factor since it affects the economy. The debt now stands at about $930 billion and is expected to reach $ 1 trillion by the end of the year. Tackling that debt at a projected monthly rate of 0.5 to 1.0 per cent of the overall amount due, means that an estimated $5 billion to $10 billion is being sucked out of the economy each month and what seems to make it worse is the fact that the country’s dismal job market leads to rising rates of delinquency and default. This eventually has led the unemployed, underemployed and college graduates have a really tough time making payments on their student loans; as a consequence, the rate at which such payments are falling is on the rise.

The factors that have created this bubble include; large numbers of college enrolees, rising tuition rates, diminishing pools of grant aid and sometimes extravagant and unnecessary spending by institutions of higher learning. Michelle Asha cooper the president of the institute for Higher Education policy told Fox News that colleges and universities have the responsibility of making sure that they are doing everything possible to retrain college costs.

Considering that America already has much to worry about this will be a further blow to the world’s superpower. Thinking over the whole situation, it is easy to understand that if you are part of these worrying statistics it will surely take you a long time to pay up your loan and what this has lined up is utter chaos. Something needs to be done sooner than later, especially with regard to job creation to cater for the huge influx of students leaving their institutions into the job market. If the government doesn’t come out to solve this issue from this particular angle then all else mechanisms they may be employing since they will be self-defeating. With unemployment levels on the high the weather is ripe for strikes upheavals and of course an increase in crime rates. This has got many people worried; teachers, parents, students and even economists are watching with fear as the volume of student loan debt keeps on growing. All we can do is hope that things will look better.

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