Student loans have become the sudden modern toxic loan. Subprime mortgages were the last. While government backed student loans can offer borrowers some advantages loan repayment programs, private student loans are grossly unforgiving and leaving more and more people stranded in a life of debt slavery without any solutions on how to break free.
Today the Pew Research Center has released a new damning report on the student loan crisis that paints a bleak and dark picture for anyone loading up on these toxic loans.
Nearly 1 in 5 households in America owes some student loan debt. This has doubled in just the last decade and has really accelerated in the last few years.
Without intervention, we should expect to see this rate of student loan saturation increase, burying more in debt and a working life of feeding the student loan payments.
The Pew Research analysis also finds that a record 40% of all households headed by someone younger than age 35 owe such debt, by far the highest share among any age group.
But those between 35 and 44 have a steeper uptick in student loan debt since 2007. The pace of acceleration is alarming.
With the growth of education costs and the level of student loan debt taken on, it’s no wonder that people with the lowest incomes are finding it tougher to shoulder the burden of student loans, making it less likely they will be able to use education as a way to lift themselves into a higher income earning bracket. Education will quickly become the least likely path to success for many.
It is not unreasonable to forecast a time when segments of our population will simply not be able to afford education at all, effectively dumping them into positions of low paying servitude.
At the very least, as student loan debt becomes a greater and greater burden on consumers in America we will see it erode the money people spent on other items and see a continued decrease in unsecured consumer debt levels. As evidence of this, the last reported figures from the Federal Reserve say that unsecured consumer debt dropped by 6.75 percent in July. – Source
Student debt is a rising proportion of total debt for most demographic and economic categories of households. Among households headed by those younger than 35 years of age, student debt rose from 9% of total debt in 2007 to 15% in 2010. The only households in which student debt has not been a growing proportion of total debt were households headed by seniors, households headed by those without a high school education, and households in the wealthiest quarter of households by net worth. – Source
The rise in education debt is a concern since consumer consumption drives the economy. With student loan debt essentially tamping out the power of our economic engine, it won’t be long before it stalls if solutions for student loan debt are not implemented.
At the very least, the ability to discharge private student loan debt in bankruptcy should be restored.