Student Loan Debt – The Latest Financial Bubble in a Series

More facts from a WSJ article on student debt. The average student loan balance for a graduate with a degree in Dance from New York University is $96,000. About 30% of student loans are in income-based repayment plans with another 20% in forbearance and another 10% past due.
 
The rate at which student loan debt is being paid off is 1%/year. Most will be defaulted on, written off under various programs or forgiven. About 12% of those in income-based repayment programs are seeing their loan balance grow even as they pay based on their income.
 
When people choose what to default on – a house, a car or a student loan – they choose not to lose the house or car, instead they go into an income-based repayment plan on their student loans.
 
Student loan debt is a burden to many adults, a huge drag on the economy, and a large and growing cost to the government whose involvement has largely enabled the explosion in debt. For any other consumer product, basic economics would have put an end to this long ago.
 
That a college degree has contributed to the economic betterment of many is beyond dispute. Should we make college free? We could. I guess it depends on how big you want government to be.
 
For nearly 20 years now the federal government has borrowed between a trillion dollars and half a trillion dollars every year, one of the many distortions tied to super-low interest rates. At some point it will become a very serious problem, especially if we opt for another national good by providing health coverage for everyone.
 
In a series of financial bubbles, government debt will be the last and biggest, but that is another story. Meanwhile, there are people running for office and more promises to be made.

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