The Other Debt Time Bomb
One trillion dollars in debt. No, I’m not talking about credit card debt, or mortgage debt, or government debt.
I’m talking about student loan debt.
According to the Consumer Financial Protection Bureau, that would be 16 percent higher than previous estimates by the Federal Reserve Bank of New Nork.
That debt has doubled in just the past five years, and it's pretty easy to see why.
For one, more and more Americans are going to college.
One of the reasons is to escape the critically low jobs market.
Between 1999 and 2009, enrollment in the nation's colleges has increased 38 percent. The decade before the jump was just nine percent.
And colleges are charging students more and more to attend school.
Plus, the published tuition charges of $8,200 dollars for in-state students at public four-year colleges, and $28,000 at private schools way understates what students really pay after you factor in housing, books, partying, etc.
Not to mention, the costs go up every year - by a lot!
Finaid.org puts average annual college cost inflation at eight percent. At that rate, the cost of college doubles every nine years.
Then there are interest costs. With this down economy, many borrowers are falling behind on payments.
The New York Fed says a quarter of student borrowers are delinquent. And this is a real problem not just for students, but parents who co-sign many of these student loans.
As well as preventing older Americans from going back to school.
Plus, the bigger impact of all of this overblown debt causes students to delay marriage, kids, the purchase of a home, and just about every other critical financial milestone.
As the student loan rep for the CFPB points out, this is one thing slowing the recovery of the housing market as a whole:
"First-time home-buyers are a substantial part of the housing market... Instead of saving for a down payment, these borrowers are sending big payments every month."
Also, in their war for paying customers, colleges are forced to offer expensive perks and features.
It's become a critical way to win the best minds, but a sushi bar in the lunchroom isn't the way to do it.
To soften the blow, the federal government has eased loan repayment terms. You can slow or stop payments for a variety of reasons if you meet requirements of the feds, but as usual, this solution is just kicking the can down the road.
I feel the pain of students, but the answer isn't to put the burden on others like taxpayers.
At the end of the day, students have to weigh their wishes and wants - all of them - against the cost of education.