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U.S. Student Loan Debt Sets Record, Doubling Since Recession

Linked by Paul Ciano on January 2, 2019

Alexandre Tanzi, Bloomberg:

U.S. student loan debt outstanding reached a record $1.465 trillion last month and one particular set of borrowers is having a hard time paying back their loans, according to a Bloomberg analysis of student loan securitization data.

“Over 90% of student loans are guaranteed by the U.S. Department of Education, meaning that if a recession causes a rise in youth unemployment and triggers mass defaults, this contingent liability could prove burdensome for the U.S. government budget,” said Paul Della Guardia, economist at the Institute of International Finance in emailed comments.

The Bloomberg analysis found that loans issued about six years ago have the highest cumulative loss percentage compared to any other year since the financial crisis ended. This indicates that students who took a loan in 2012 have had a much more difficult time making their monthly payments compared to students who received loans shortly before and after – students who have had a similar amount of time to pay them down.

A large percentage of those who took out loans in 2012 are currently 24-33 years old, an age where many are generally establishing themselves in their careers. Borrowers in this group entered the labor force when the unemployment rate was twice as high as today and may have found it difficult to find a career track in their desired field. Further adding to the difficulties faced by this group was that finding a position in 2012 took almost three times longer than today, according to data from the Bureau of Labor Statistics.

Many student loan borrowers face significant debt burdens. Over 2.7 million borrowers owe in excess of $100,000, of which, about 700,000 owe $200,000 or more, according to data from the U.S. Department of Education. One year earlier, 2.5 million owed in excess of $100,000.

Many Americans are taking student debt with them into old age too. At the end of September, 1.8 million borrowers age 62 and older owed $62.5 billion in federal student loan debt and those in the 50-61 age group owe $213.6 billion, according to data from the Department of Education. In just one year, the aggregate amount owned by borrowers over the age of 50 increased by $28.8 billion or 11.6 percent.

Paul Ciano

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