Suffocating U.S. student debt

Nieuws | de redactie
24 november 2011 | The rating agency Moody’s already described American student debts as the next financial bubble to burst. Recent data now shows the situation is even worse than expected. Within two years the number of defaults on student loans increased by one third.

Following the financial crisis in 2007/2008 the number of U.S.students defaulting on their student loans has increasedsignificantly, data from the report ‘The State of Young America’ shows.Overall default rates for students increased from 11% to 15%comparing data from 2007 and 2009. Analysts from Moody’s already depict U.S. student loan debt as the nextfinancial bubble to burst.

“As training and education have become essential to finding agood job, college costs have soared and U.S. investment ineducation and job training has declined. For example the maximumPell grant (a federal grant to low income college students) covered69 percent of the average cost of a four-year college in 1980.Today it covers only 34 percent, according to the study.”

Student debt greater than credit card debt

“How do students afford college? They borrow, and for the firsttime in our history, total student loan debt is greater than totalcredit card debt. The college graduate begins post-college lifewith an average debt of $24,000,” states Demos in itspublication.

In 2010/2011 student loan debt was totaling almost$920.000.000.000 while credit card debts decreased from$1.000.000.000.000 to $800.000.000.000. This phenomenon is quiteoutstanding given that in 1997/1998 credit card debt was five timeslarger than student loan debt ($100.000.000.000).

Data also show how different parts of the American societysuffer from this large debt burden. “African American students aremore likely to take out student loans, and to graduate with moredebt. Among 2008 bachelor’s degree graduates, 80 percent of AfricanAmerican students borrowed to pay for their education in 2008,graduating with an average debt of nearly $29,000. Nearly one inten undergraduate students leave school with over $40,000 inloans-requiring a typical loan payment of about $460 per month over10 years.”

U.S. student loan debt by FastWeb

(Source: FastWeb)


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