The Problem with Student Loans

Are Student Loans Declining?

A big shoutout to all students taking action on their student loans. The light is far from darkness, little by little the big step will be accomplish.

Students with loan debts has decrease over the past few years, however individual borrower balances aren’t going down mostly because students simply can’t pay it off.

Student loans total more than $1.6 trillion, more than twice over the last decade and tripling since 2007.

Fun fact in a study by Moody’s Investors Service stated just 51% of borrows who took out loans from 2010-2012 have made advances at all in paying down their debt.

First, several borrowers are taking full advantage of repayment plans based on borrower’s incomes, along with some opting for longer repayment choices. 

President Joe Biden with Democratic candidates want to reduce student debt essential  of their campaigns. This will intentionally “stimulate the US economy but have negative effects for some financial institutions”

Yes, we can only imagine a situation where student loans will simplify vanish. With knowing college having a cost it will truly take some time.

In the meantime, student loans linger with an 11% default rate that is the highest of any debt category.

Large Default Rate

There are various reason why the debt floors are not decreasing.

“Increased reliance on student debt crowds out an individual’s access to other forms of household credit, which likely delays business formation and homeownership, important drivers of economic growth and wealth creation,”-CNBC

One indication that the pressure may alleviate if only a bit is that the annual growth rate decelerated to 5% in the third quarter of 2019, down from the peak of 14.7% at the end of 2008, according to the Federal Reserve.

Not to fear, in the future repayment rates could accelerate in the future especially for students in for-year and graduate schools as opposed to community colleges.

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