This week, the Federal Reserve Bank of New York offered continuing evidence of the student debt crisis. Outstanding student debt again topped $1 trillion in the fourth quarter of 2013, making it the second-largest pool of debt in the nation behind mortgages. This has tripled in just a decade, as higher-education prices increased faster than medical costs, up 500 percent since 1985. While delinquency rates for all loans have trended downward for the past three years, student loan delinquencies have surged; currently 11.5 percent of all student loans are 90 days behind or more.
The recent explosion in student debt—now held by one in five U.S. households—coincided with the Great Recession’s awful job market. Millennials have come of age amid stagnant wages, high unemployment, a lack of quality jobs (44 percent of recent graduates work in positions that don’t require a college degree), and, for those fortunate enough to attend college, an average of nearly $30,000 in debt. [...]
If the Great Delay persists, it will handicap millennials for decades to come. A student taking out $53,000 in debt will lose $208,000 over his lifetime, according to the think tank Demos, because he will be less able to build home equity or save for retirement early in his life. There are solutions. Giving debt-holders refinancing options, or moving to a more manageable repayment schedule based on income, would certainly help. So would making college affordable, if not free. And of course, a few more jobs would be nice. But if the student debt treadmill really is stunting the growth of the economy, those jobs may never materialize. And without action, we’ll have no answer for a generation of debt slaves.
Read the Demos report: At What Cost? How Student Debt Reduces Lifetime Wealth