The New Debt Bubble – Student Loans

by Laura Ehrenberg-Chesler on December 6, 2012

in Credit Crisis,Debt,Education,Employment

In the November 27th edition of the sounds a warning bell about the looming crisis in the student loan market. While other consumer debt has shrunk in the wake of the financial crisis which began in 2008, student loans have ballooned. This would not be a problem except for the fact that many of these loans were made by the Federal government, and did not

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require much information about the borrower”s ability to repay the loans, leaving the taxpayers on the hook….again.

The federal lending program designed to make college education available to everyone is creating a pile of debt so large it is fanning worries that it has become too easy to borrow too much.

U.S. student-loan debt rose by $42 billion, or 4.6%, to $956 billion in the third quarter, the Federal Reserve Bank of New York said Tuesday. Overall household borrowing fell during that period.

Payments on 11% of student-loan balances were 90 or more days behind at the end of September, up from 8.9% at the end of June, a rate that now exceeds that for credit cards. Delinquency rates for all other consumer-debt categories fell or were flat.

Nearly all student loans—93% of them last year—are made directly by the government, which asks little or nothing about borrowers” ability to repay, or about what sort of education they intend to pursue.




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