Student loans could be the next economic 'debt bomb'

A student at the Admissions Building at Harvard University in Cambridge, Massachusetts.

Here's a story you think you've heard before: Go to college. Work hard. Get a degree. Find a good-paying job. Buy a car, a house, and maybe raise a few kids. Life's good.

But these day's there's a new twist to that plot: It's called student debt. And the latest facts and figures on that debt from the Fed are sobering. Total student debt now stands at nearly $900 billion - about $200 billion more than total credit card debt - and about 15 percent of us are saddled with it.

But here's what really caught our eye: as many as 27 percent of borrowers are behind on their monthly student loan payments. Consumer bankruptcy lawyers say they're seeing a big jump in the number of student loan borrowers knocking on their doors. They're even talking about it as the next "debt bomb" for the U.S. economy.    

We headed to the campus of the University of Southern California to talk to students about the debt they're racking up. And we talked to Marketplace education correspondent Amy Scott about the impact  it is having on those students' future and the economy.

"There's some evidence that young people might be postponing big purchases like cars and homes, and even putting off starting a family, things like saving for retirement or for their own kids college." Scott said. "So that's money that isn't going into the economy. So the impacts are beyond the individual level."

The numbers make that clear. The average student loan debt is $23,000, according to the New York Fed. About 10 percent of borrowers owe more than $54,000. And 3 percent owe more than $100,000.

For more on the options students have to deal with that debt, and for insight on the value of a college degree, listen to the full interview above.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.
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"Are they able to recoup the cost of their education?" If they start their 50s with over a hundred thousand in debt? Probably not; and rational people do not take such education debt at that age in their lives.

This problem is far more complex than people would like it to believe. Yes, some students have made bad choices, but they made those choices based on a promise that there would be jobs for them at the end and a better life. The other part of this commented on far less often is how state governments have caused the escalation of student loan debt by withdrawing funding from colleges and universities causing the tuition to skyrocket. We, as a country have to realize that the minds of the next generation are an important investment too. We rationalize huge executive salaries and corporate profits without considering the price we all pay for them. Cutting tax rates and poor budgetary decisions also have a price that we leave our country less prepared for the future. The cost to all of us then is a declining standard of living and a country that is no longer competitive in the world marketplace.

I have listened to yet another story about the student loan debt "crisis". Not one story has ever addressed the problem of the lack of student responsibility when acquiring this debt. I have very little sympathy for a student who takes on 50, 60, or over 100 thousand dollars in debt to attend a private school and obtains a degree in a field that has no monetary value in the job market. There appears to be no thought whatsoever on the front end of this transaction and it suddenly is a crisis after graduation. There should be a cost/benefit analysis of your school choice AND your degree choice before college. Why should the tax payers be on the hook because a student chose to attend an expensive private university and got a degree in French Literature and can't find a job? And what happened to WORKING and paying as you go? What is the rule that you must finish college in 4 years? Take a semester off and pile up some cash. Drive a wreck, buy used textbooks, live in the dorm and use their food plan, work more and watch TV less. If you must take out some loan debt, then start paying the instant you graduate. Forget the deferment. Continue to live like that poor college student and pay it off with your new grown up income. Free yourself from the chains of that debt. It worked for me.

is there a student debt contraceptive that one can wear as a living, breathing tax payer? the selfish students who strap me with their debt and then call me "government" need corporal punishment. i appreciate Marketplace Money for covering this decline in financial freedom of taxpayers, but frankly, the program did a lousy job of calling it out. Marketplace would serve its listeners better by educating us in how to prevent others from encumbering us with their poor spending decisions than promoting the equivalent of reckless, unsafe education sex.


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