Remember how I wrote on all the federal loan programs and college debt? Well that college debt keeps growing and it is getting a bit scary.
- Over the past year alone, the total balance of the direct loan program has grown from $687 billion (with a “B”) to $806 billion.
- The total size of the student loan debt is now in excess of $1.13 trillion (with a “T”).
- Since 2007, the federal direct student loan program has increased near seven fold.
- This increase in leverage on students creates an interesting relationship between the federal government and indebted students.
Woe to the Students
Based on the statistics above you may reach the same conclusion I have. The student debt situation in America is a rapidly growing concern that merits some attention. When considering the sour job market and the ever growing cost of attending college the above statistics really should come as little surprise. Unlike the housing bubble where banks were the holders of the debt, the federal government now holds 80% of this debt. The future consequences of this system have yet to be seen.
An interesting consequence viewable now is that young adults are lessening consumption according to research by the New York Federal Reserve. Less than 25% of young adults aged 27-30 have any sort of home secured debt (eg. A mortgage). This pattern is also evident in the auto market. This makes intuitive sense as this age group is already straddled with student debt and is unwilling to take on more debt.
Will universities continue to increase costs of attending? Will the federal government continue to grow the monstrous student debt? What alternatives are available to solve the ubiquitous issue of paying for college? I wish I knew these answers. What can be said is that it will be interesting to see the relationship that emerges as more and more young Americans become indebted to the federal government.