BLOG: Student Loan Bubble…Worse than the Mortgage Crisis?

WOW…the news just keeps getting worse.  Yet the number of students we see from government schools who are completely ill prepared, not only academically, but financially continues to grow. 

Taken from National Center for Education Statistics

• The growth of federal student loans outstanding in the past decade ($583 billion) is larger than the size of the government's TARP bailout package ($431 billion). 
• Borrowers who graduated had a default rate of 3.7 percent in 2009, while those who dropped out had a default rate of 16.8 percent, and ... a larger portion of the student loan debt is falling on those who will not receive the financial benefits of earning a degree.
• Barely half of all borrowers were making payments as of the third quarter of 2011; 47 percent were either still in school or in deferral, forbearance or grace periods.
• Given the weak labor market and increasing dropout rates, there is little reason to think that ... future delinquency rates will be lower than the current national average (14 percent for all borrowers).
• Currently, 15.5 percent of the outstanding student loan balance is held by borrowers 50 and older, and 4.2 percent is held by those 60 and older; and these age cohorts hold an even larger share (16.9 percent and 4.8 percent respectively) of the total past-due student loan balance. The average debt burden for borrowers over age 60 is $18,250.
• The median education debt belonging to households in which the head of the household is retired increased by 62 percent between 2007 and 2009.
• When combined with forecast growth in issuance, we estimate that the government will lose around $65 [billion] on student loans in the coming decade from subsidy rate re-estimates alone. 
• Between now and 2020, we think that IBR [the new income-based repayment programs] will cost the government a total of $190 [billion, due to write-offs].

Makes my stomach hurt. 

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