U.S. Student Loans Total $1.1 Trillion

The GI Bill led to the mass-marketing of higher education. In the decades that followed, politicians (at the behest of various activist groups, businesses and constituencies) plowed enormous amounts of easy money into the higher ed system. It came to be a virtual entitlement to the middle class. (Gloss over for the moment the problem of mistaking the markers of middle-classness for it’s causes). Higher ed is good! So more money! Nobody wanted be the meanie bear who cuts spending for aid to college students. So you have a situation where huge amounts of easy money are available for the purchase of a good, and relatively little of the cost is being borne by the purchaser of said good at the time of the sale. This is a recipe for rampant price inflation in ANY market. The prices skyrocket, which is used as justification for more easy money in order to make it more “affordable.” This easy money pushes prices up again. Rinse, repeat. It’s not unlike what happened in the housing market.

See College Costs Have Tripled Since 1980, and are Going Higher, Even as Wages for the Middle Class Have Stagnated

US Treasury sounds alarm over student loans

April 29, 2014

AFP - At least 40 million people have taken out a student loan, Raskin said, and by the time students graduate, the average amount of loans is $30,000, and they will spend ten years or more repaying.

And many never manage to repay them at all, Raskin said during a speech at the University of Maryland.

"While delinquency rates on many other types of debt have fallen in recent years, delinquencies on student loan debt are rising," said the Treasury Department number two, noting that some seven million Americans had defaulted on their student loans.

At the end of 2013, the total amount of US student loans approached $1.1 trillion, well above the total amount of credit card debt in the country.

And the percentage of students graduating with debt is on the rise -- 60 percent of graduates in 2012, compared to just 30 percent in 1993.

"These numbers are daunting; to what extent should we be concerned?" Raskin asked, emphasizing that such figures could have an impact on the rate of economic growth in the country.

Late payments and defaulting on student loans could later hinder the borrower from being able to get other loans, including mortgages and car loans.

And sometimes, she said, defaulting on a student loan could hinder a candidate from getting a job, because employers often check credit history and consider past problems to be a sign of irresponsibility.

The large majority of student loans in the United States are financed by the federal government, but distributed by agents or private banks.

Raskin, who left the Federal Reserve to join the Treasury Department last month, called on these lenders to make it easier to modify payment plans for borrowers who find themselves struggling to meet their obligations.