Unsustainable: Debt Rising for Students, Individuals

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Following the U.S. general elections last November, Peculiar Progressive complained of 11 major issues facing the country that candidates avoided discussing during their campaigns. The first two issues dealt with citizens’ personal debt:

  • The over $1 trillion college loan debt, which is frustrating our young, and even abusing our elderly.
  • The $1 trillion credit card debt, which is increasing as banks turn more to subprime lending, not only for credit cards, but auto loans, and, yes, mortgages.

The student and personal debt continue to grow as we move through 2015.

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Student Loan Debt

Student-loan-debt
Average student loan debt: over $35,000.

The national student loan debt now stands at over $1.2 trillion, according to an Aug. 2 article by The Motley Fool, a very serious multimedia financial-services company despite its bring-a-smirk name. Other sources see it higher.

The class of 2015 graduated with an average student debt of $35,051, according to MarketWatch, calling it “the most student debt in history,” adding:

That’s about $2,000 more than their peers who graduated in 2014, though the share of students graduating with debt remained roughly the same as last year at about 70%.

 

A combination of stagnant wages, declining federal and state funding to schools on a per-student basis, and rising tuition has meant that families ‘have only two real choices’ when it comes to paying for college: borrow more or try to send their kids to a cheaper school, said [Edvisors.com publisher Mark] Kantrowitz.

The Motley Fool points out the student loan debt is not only high, it’s confusing. And it can mire graduates into a debt cycle foiling efforts at marriage and homebuying, or even renting:

Student loans are different from many other forms of debt, with special rules and programs having to do with repayment options, loan consolidation, and even how they’re treated in bankruptcy…

 

…Starting in 1976, loans offered by the federal government or non-profit colleges and universities had to be repaid, no matter the circumstances. This made sense, as these organizations were often loaning the money out at lower interest rates than one could find on the open market, backed by private companies.

 

Starting in 1984, private loans for student tuition were added to the list of non-dischargeable debts. This means that even if you file for bankruptcy, your student loan lender can have your wages garnished from your paycheck until the loan is paid off in full.

Back in February, James McAndrews, Executive Vice President and Director of Research for the Federal Reserve Bank of New York, stressed the rising problem that student loan debt was creating for the U.S. economy:

Student loans seem like a good part of the solution, but over the past decade our reliance on loans for funding higher education has increased and we are learning that they have many problems and implications we had not sufficiently understood or considered…

 

… between 2004 and 2014, the total student debt in the US tripled from $364 billion in 2004 to $1.16 trillion in 2014… Between 2004 and 2014, the number of borrowers increased by 92 percent from 23 million borrowers to 43 million. In the same period, average debt per borrower increased by 74 percent, from about $15,000 to $27,000.

That brings us to over midway through 2015, where that $27,000 average student loan debt has increased to over $35,000. With no relief in sight. A truly abusive position which the federal government, banks, and higher tuitions have forced on our young people.

Is there a solution? Yes. There are countries that offer free higher education, so their young people can graduate and immediately begin contributing to the economy rather than be stifled by debt. The press has begun to write about those, such as articles in Salon, and Wikipedia gives you an overview of free education globally. Also at least two announced presidential candidates — the Green Party’s Jill Stein and socialist Democrat Bernie Sanders — have free higher ed in their platforms.

Personal Debt

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Debt-Advice
Personal debt per U.S. citizen: $52,622.

Meanwhile, the monster scaring economic analysts globally is the rising worldwide private debt which could lead us into another global economic meltdown. Analysts were grumbling over it as far back as March 2014, as you can see in this analysis on Daily Ticker.

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 Peculiar Progressive showed international debt concerns in columns here, here, and Wall Street’s continuing manipulation of credit here.

For an overview on the growing problem in U.S. personal debt, check out the U.S. National Debt Clock at www.usdebtclock.org. Its figures are garnered from federal agencies including the Treasury Department, Congressional Budget Office, and U.S. Census Bureau.

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Looking at the clock on Aug. 3, we see personal U.S. debt at $16.9 trillion. Mortgage debt at $13.5 trillion. Student loan debt now closing in on $1.4 trillion (real-time total via the Federal Reserve). Credit card debt at $904 billion. Personal debt per U.S. citizen: $52,622. Median income: $28,868.

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Good night, and good luck.

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