Student loans seen as potential ‘next debt bomb’ for U.S. economy

/ Steve Krause

An alert EMUTalk.org reader sent me this from Saturday’s Washington Post, “Student loans seen as potential ‘next debt bomb’ for U.S. economy.”  Here’s the opening paragraphs:

Bankruptcy lawyers have a frightening message for America: They’re seeing the telltale signs of a student loan debt bubble that is placing increased financial pressure on families struggling with their children’s mounting debt. According to a recent survey by the National Association of Consumer Bankruptcy Attorneys, more than 80 percent of bankruptcy lawyers have seen a substantial increase in the number of clients seeking relief from student loans in recent years.

In most cases, those clients could not meet the federal hardship standards that are necessary to discharge a student loan through bankruptcy proceedings. Instead, many of these parents or guardians who co-signed the student loans face the prospect of losing their life savings, cars or homes to collection agencies for aggressive private lenders.

And then there’s this alarming paragraph:

The amount of student borrowing skyrocketed from $100 billion in 2010 to $867 billion last year — or more than the $704 billion in outstanding U.S. credit card debt, according to the Federal Reserve Bank of New York. Of the 37 million borrowers who have outstanding student loan balances as of third-quarter 2011, 14.4 percent have at least one past-due student loan account. Together, these balances come to $85 billion, or roughly 10 percent of the total outstanding student loan balance.

Yikes.

5 thoughts on “Student loans seen as potential ‘next debt bomb’ for U.S. economy”

  2. The numbers in this sentence: “The amount of student borrowing skyrocketed from $100 billion in 2010 to $867 billion last year” can’t be right. That would be $767B of debt accumulation in 1 year. There are about 20M college students in the US (see http://nces.ed.gov/fastfacts/display.asp?id=98 ); 767B/20M=$38ish thousand per college student. While a student at a private school might borrow that in one year, not all of them would, and the 20M also includes part-time students, community college students, etc.

    Indeed, here’s a graph of recent total student debt:
    http://www.nytimes.com/imagepages/2011/04/12/us/12college_graphic.html?ref=education
    It shows the debt was about $200B in 2000, so the $100B in 2010 quoted above seems implausible.

    Perhaps they meant it grew by $100B in one year? That would be a 1-year growth of $5k/student, which is more plausible.

    Maybe I’ll use this example in my Math 110 classes.

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  3. Andrew,
    Now I know for sure that you’re the kind of pesky math professor who wants the numbers to be right and calculations to be correct. Why not just adapt the American standard of winging it, guessing, and making stuff up? A million dollars is the same as $30,000 when pretending to calculate increased faculty health costs at EMU, so what’s a hundred billion more or less in student debt for the whole country? “Revenue sports” generate costs far in excess of revenue, but why should net loss matter, when we can stick the bill to students?

    The point of numbers is to use them to panic people! Only pesky academics care if they’re correct — on this campus, or in this democracy! Troublemakers, all, and away with them!

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  5. and, professors can do their part by not requiring hugely expensive textbooks especially when an earlier edition would do with some adaptation

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