Is The College Debt Bubble Getting Worse?
Career College Central summary:
A new report shows that around one in seven borrowers defaulted on their federal student loans. According to the U.S. Department of Education, the national two-year cohort default rate increased from 9.1 percent to 10 percent in fiscal year 2011 compared to the previous year. Making matters worse, the three-year default rate jumped from 13.4 percent to 14.7 percent. Those are the highest default rates in about 15 years, and they don’t even include people who are delaying payments through forbearance or deferment.
“The growing number of students who have defaulted on their federal student loans is troubling,” U.S. Secretary of Education Arne Duncan said in a press release. “The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. We remain committed to building a shared partnership with states, local governments, institutions, and students — as well as the business, labor, and philanthropic leaders — to improve college affordability for millions of students and families.”
A college degree was once considered to be a guaranteed path to the American Dream. However, rising debt loads have many graduates living a financial nightmare, and the side effects are impacting other areas of the economy. Due to monthly loan payments, about 47 percent of student borrowers have delayed buying a house, according to a recent survey by Young Invincibles, an organization that represents the interests of young adults.
The same percentage of borrowers also put off buying a car, while 35 percent said they postponed starting a family. Twenty-three percent of respondents stated that they put off starting a business, and 15 percent said they tried to receive a mortgage but were denied. Even more concerning, 76 percent said they saved less for the future, which will undoubtedly cause additional problems down the road.
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