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America’s $1.3 Trillion Student Loan Debt Crisis

Here are some quick facts you may not know about our exploding student loan crisis:

Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. Let that sink in.

There are more than 44 million student loan borrowers with $1.3 trillion in outstanding student loan debt in the US alone, as of the end of last year.

The average student in the Class of 2016 has $37,172 in student loan debt. That is up more than 70% from just a decade ago. Over 5% of student loan borrowers owe more than $100,000.

The student loan delinquency rate climbed to 11.2% in the 4Q of 2016, the highest rate for all types of household debt. More than one in ten student loan borrowers are at least 90 days behind in their payments.

On average, more than 3,000 borrowers default on their federal student loans every day. Thus, the student loan debt crisis is even worse than it looks.

Finally, the rise in outstanding student debt is directly correlated with the out-of-control rise in college tuition rates.

This means that student loan repayment is taking a back seat to other pressing financial demands, such as rent or mortgage payments, household bills, credit card balances, etc.

The latest student loan debt statistics for 2017 show how serious the student loan debt crisis has become – for borrowers across all demographics and age groups.

Over the past five years, student loan debt balances have grown across every age category. On a dollar basis, the highest increase in student loan debt is among 30 to 39-year-olds, who as a group now hold over $408 billion in student loans.

Yet the largest concentration of student loan borrowers is under 30 years of age, followed by the 30-39 age group. Therefore, there are 29.4 million student loan borrowers under the age of 39, with this group representing 67% of all student loan borrowers.

So enough statistics for now. The greater question is whether having ever more young Americans go to college and incur such huge debts is really worth it? This debate is far from settled. Here are some of the prevailing arguments.

Evidence overwhelmingly shows that the average earnings premium associated with having a college education is high and has risen significantly over the past several decades. This is in part because of a decline in real average earnings for those without a college degree.

What is clear is that to cover the rising cost of college, students and families have increased their reliance on student loans to fund a greater share of increasing college costs.

While the federal student loan program has helped mitigate the impact of higher costs for college access and enrollment, more and more students now leave college with higher amounts of debt.

Given these trends, it is critical to understand whether holding student debt has affected young Americans’ later life outcomes, such as homeownership.

While numerous studies over the years have documented that those with a college education have a significantly higher probability of becoming a homeowner, more recent studies have shown that student debt holders experienced a sharper decline in homeownership during the Great Recession.

Let me cut to the chase. Student loan debt is completely out of control at $1.3 trillion and is unquestionably a looming financial crisis. The average college graduate in 2016 had over $37,000 in outstanding student loans.

As a side note, remember that one of the first things Barack Obama did on becoming president was to federalize the student loan program, making it easier than ever before for college students to go into debt.

Next, annual college tuition rates have outpaced the price increases of just about any other commodity we Americans consume. Sadly, there is no concerted effort to reign-in these tuition price increases every year.

Yet there is more pressure than ever to send our kids to college and incur huge amounts of debt in the quest to get good jobs. The academic community is well aware of this.

The only question is whether or not it’s really worth it? My first thought is, not everyone needs to go to college. More high school grads should consider shorter, cheaper vocational schools. There are plenty of trades where skilled workers can make more money than many college graduates.

In any event, it’s certainly not good for the average college student to graduate with over $37,000 in student loan debt. If they pay it back, it will stunt their wealth building potential; if they default, it will ruin their credit.

Parents should think long and hard before encouraging their kids to take out student loans. Instead encourage them to work while going to college, like I did.

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