Student loan debt hits a new record of nearly $1.5 trillion: Report
A new report is signaling a dire warning for the U.S. economy as Federal student loan debt sets a new record, doubling since the end of the recession in June 2009.
According to a Bloomberg analysis, U.S. student loans debt hit an all-time high of $1.465 trillion in November.
The analysis found that student loans taken in 2012 defaulted at a greater rate than any other loan since the recession.
Dan Mitchell, Center for Freedom & Prosperity co-founder, puts the blame on the government for enabling tuition to climb sharply at colleges and universities.
“The government started giving out student loans, universities and colleges said, ‘hey, look at all this money out there lets jack up our tuition’,” he said during an interview on FOX Business’ “After the Bell” on Tuesday.
More than 44 million Americans take out student loans and over 2.7 million borrowers owe in excess of $100,000, according to the U.S. Department of Education. With 90% of the loans backed by the Education Department, Mitchell says, an economic downtown combined with rising default rates could potentially put the U.S. economy in a tailspin.
“It is very frustrating for an economist to look at such a predicable mess in affect the government has done with student loans what they’ve done with healthcare,” he said. “Third-party payer has destroyed the pricing system. “
Mitchell added the rise in student debt could also have a serious impact on the housing market with zoning ordinances from local governments preventing the construction of new housing.
As a result, the lack of completion in housing market increases the value of existing homes.
“The pricing is going up for that reason while at the same time, these young people their income is down or at least their disposable income is down,” Mitchell said. “They just don’t have as much to put into housing.”