US Student Loan Debt Hits Record $1.4 Trillion


Student loan debt reached a record $1.4 trillion in November -- a number which could ultimately test the U.S. economy. 


The current level is more than double the $675 billion outstanding in June 2009 when the recession ended, according to a Bloomberg analysis of student loan data.


Since more than 90 percent of student loans are guaranteed by the U.S.Department of Education, if another recession causes a rise in youth unemployment and triggers mass defaults, this liability could prove burdensome for the U.S. government budget,” said Paul Della Guardia, economist at the Institute of International Finance told Fortune.


Others argue that student loans are not altogether bad for the economy, if the borrower is able to pay it off while also making purchases at the same time.


The problem is that sometimes people are taking on student loans for education that is not worth it, or taking on student loans and dropping out of school and not paying back their debts,” says Preston Cooper, research analyst at the American Enterprise Institute.


Borrowers in the 25-34 age group owed $489 billion as of the third quarter,slightly less than $530 billion balance for 35 to 49-year-olds.


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.


For people with $50,000 to $100,000 in debt, those people are actually usually doing okay because they probably went to graduate school,they got an advanced degree.  They have a lot of debt, but they also have a pretty high income to compensate,” says Cooper.


Loans disbursed in 2012 have defaulted at a faster rate than any other loan cohort since the financial crisis.  Meanwhile,the interest rate for student loans is more than 100 basis point higher than those issued in 2012.



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