The next, soon-to-come, financial crash is already baked in the cake. The share of 25-year-old Americans with student debt increased to 43 percent last year from 25 percent in 2003, according to the Federal Reserve Bank of New York. During that nine-year period, the average education-loan balance of people in that age group increased 91 percent, to $20,326 from $10,649, according to the New York Fed. With so much outstanding student debt, borrowers are having trouble contributing to the U.S. economy in other ways. It has become harder for young people, especially those between 25 and 30, to secure other types of credit, including home mortgages, according to a February report on household debt and credit by the New York Fed. Economic Drag Economists warn that what is owed in student loans may rival home-mortgage indebtedness as a drag on U.S. growth. “The difficulties borrowers face when trying to manage cash flow may have a broader impact on the economy and society,” Rohit Chopra, student-loan ombudsman at the Consumer Financial Protection Bureau, told the Senate Banking Committee on June 25. “When young workers are putting large portions of their income toward student-loan-payment payments, they’re less able to stash away cash for that first down payment.” Private borrowing for student loans grew after Congress overhauled bankruptcy laws and made such debts non-dischargable in personal bankruptcy. That change meant that “there were very few reasons for banks not to make educational loans to anybody who wants them,” Hartle said. “Most students who get in trouble by borrowing huge amounts of money get there because they have borrowed from private lenders” without the knowledge of their college or institution, he said.
Posted on: Fri, 28 Jun 2013 01:47:41 +0000
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