Student Loan Debt Crisis is Only Going to Get Worse

The student loan debt crisis is showing no signs of getting better anytime soon. In fact, all of the signs point toward the situation getting a lot worse before it gets any better, according to a published report.

Student loans are the only category of consumer debt that has grown in the past 10 years — about 157%, compared with a 52% jump in the amount of auto loans outstanding. Couple the dramatic rise in the amount of loans out there with a delinquency rate that is 10 times higher than auto loans or mortgages and it doesn’t take the world’s best weatherman to see the storm clouds on the horizon. To add insult to injury, an economy that is improving means interest rates are going up. That means it’s going to cost individuals with student loans more to repay their debts.

More loans plus more delinquencies plus higher interest rates equals nothing but problems for the student loan industry.

“There’s a systemic problem in the student loan market that doesn’t exist in the other asset classes,” said John Hupalo, founder and chief executive officer of Invite Education, an education financial planner. “Students need to get a job that allows them to pay off their debt. The delinquency rate will rise as long as students aren’t graduating with degrees that pay back that cost.”

Issues with student loans are starting to cause problems in the broader economy. Individuals in their 20s and 30s are delaying buying a house or getting married, possibly because they are saddled with tens of thousands of dollars in student loan debt. Four times as many people between the age of 25 and 35 are living at home with their parents now than did 10 years ago.

“You have a whole generation of people that have a significant amount of student loans and its crimping demand for other goods and services,” said Ira Jersey, the chief U.S. interest rate strategist for Bloomberg Intelligence. “As people live with their parents, or cohabit with a non-partner, millions of houses and apartments aren’t being purchased. Neither is Wi-Fi or that extra sofa. We think this is having a significant impact on the economy.”

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