What’s the state of student loans for American higher ed, and how is that situation likely to develop in the future? A new Bloomberg investigation yields some important and disturbing insights.
I’ll put out some key details here.
…and just to deflate any narrative tension you might be experiencing, dear reader, there aren’t many surprises. If you’ve been paying attention to student loans, that is.
The total amount of students loans is now $1.5 trillion, by Bloomberg’s count. (When will we hit $2 trillion, 2025?) Interest rates are rising, too.
Recent growth in student loans (2007 on) has outpaced all other kinds of consumer debt, by far:
Bloomberg also joins the rest of us in finding student loans exerting a downward pressure on the larger economy:
As young adults struggle to pay back their loans, they’re forced to make financial concessions that create a drag on the economy. Student debt has delayed household formation and led to a decline in home ownership. Sixteen percent of young workers aged 25 to 35 lived with their parents in 2017, up 4 percent from 10 years prior…
It’s a question of depressed demand, since loan-holders are devoting more dollars to paying down debt than did previous generations:
“You have a whole generation of people that have a significant amount of student loans and its crimping demand for other goods and services,” said Ira Jersey, the chief U.S. interest rate strategist for Bloomberg Intelligence. “As people live with their parents, or cohabit with a non-partner, millions of houses and apartments aren’t being purchased. Neither is Wi-Fi or that extra sofa. We think this is having a significant impact on the economy.”
Meanwhile, student loans are also more likely to be behind in getting paid back:
Student loan debt currently has the highest 90+ day delinquency rate of all household debt. More than 1 in 10 borrowers is at least 90 days delinquent, while mortgages and auto loans have a 1.1 percent and 4 percent delinquency rate, respectively…