Student loans are now a bigger debt burden than consumer credit. That’s the word from the Federal Reserve’s June 2010 numbers. The Wall Street Journal reports that outstanding revolving credit stands at $826.5 billion, but Americans currently owe more than $829 billion in both private and federal student loans.
According to estimates from Mark Kantrowitz, who runs FinAid.org, about $600 billion or so of that that student loan debt comes from federal student loans. But Kantrowitz says about half of the federal student loan debt has been incurred in the last four years, WSJ reports.
Part of it has to do with demographic shifts: more students are of college-going age or are headed back to school these days. And with the recession and rising tuition costs, people don’t have the cash on hand to pay for school.
There are crucial differences between private student loan debt and other kinds of crushing financial burdens though. For one, student loan debt is almost impossible to discharge. You can’t get rid of it by filing for bankruptcy. You can’t get rid of it by dying, either. (Yeah, nice try.) Companies have the indefinite right to garnish your wages—up to 15 percent of your take-home pay. Say you’re 65, and you still haven’t finished paying your student loans, well your Social Security—if there’s any left for our generation by the time we’re eligible—can be withheld, too.
In 2007-2008, the typical college student graduated with $23,000 in debt. Today, not only is student loan debt on the rise, so are the numbers of those who eventually default on them. One in five people who’ve taken out government student loans since 1995 have defaulted on them. And for people of color, the rates are much higher.
And unfortunately, not much about the student aid reform bill, which passed earlier this year along with health care reform, will address these problems. What the student loan industry needs is more regulation. The public higher education system, too, desperately needs some long-term investment. But in order to start chipping away at these billions, what the rest of Americans need are jobs.