Hello? Anyone there in the hallowed halls of Congress paying attention to the student loan crisis? Hello? Yep. That’s what we thought. No one is listening…at least not in any meaningful way. Sure there’s been a spate of legislation proposed about lowering interest rates on loans – but only on new loans. The bubble that’s poised to burst isn’t being pushed to the limits by new loans – it’s the insidious trillion dollar existing balance that’s got educational debt on the brink of going nuclear.
Only one of the proposed laws has any teeth when it comes to existing loans – and it’s not projected to gain any traction. And the news today? Outcry over the impending doubling of interest rates for subsidized loans… That’s great, but again, is only the tip of the iceberg that’s threatening our student loan Titanic… And who’s on board our luxury liner of debt? Gen Y for the most part. By ignoring the issues of all of the current debt that’s not being serviced, we are heading for a disaster – and much like the ill-fated ship of dreams, we too have little in the way of lifeboats.
Over the past nine years, student loan delinquency rates have nearly doubled – jumping from 6% back in 2003 up to 11.2% as of Q1 2013 according to the Federal Reserve. And if the percentage wasn’t bad enough – consider that’s a greater percentage of a greater balance. In 2003, total federal student loans owed was roughly $300 billion a decade ago. BTWs – if you don’t want to crunch the numbers yourself, that’s a 275% increase to get us to the $850 billion federal outstanding today.
So let’s dig a little deeper – 6% of $300 billion is about $18 billion of delinquent loans back in 2003. Fast forward to the end of March 2013 and 11.2% delinquency means that over $95 billion in student loans is now delinquent. That’s billion with a huge honking capital B. I feel like I should have a bald cat and do a Dr. Evil pinkie at the corner of my mouth when I say that – because it is shocking.
GEN X AND GEN Y HIT HARDEST
And when it comes to who owns this debt – by and large it’s Gen X and Y – mostly the Y! Those under age 30 are the biggest segment of borrowers – over 14 million debtors. This is more than all borrowers age 40 and up. The next biggest faction? Age 30-39 with nearly 11 million owing student loans. These two age groups make up more than 66% of all student loan borrowers.
The recession has hit this group hard with many recent college grads forced to take jobs serving up cappuccinos and fries to the rest of us, despite their degrees. And while there may be reports that sound encouraging – the number of those on unemployment rosters dropping – think again. These numbers do not reflect those that no longer qualify for unemployment, have abandoned all hope of getting a job or are drastically underemployed.
So Congress – if you are listening – by all means, go ahead and do something about that student loan rate doubling. But don’t think that’s the end of the crisis. All of us – Gen X and Gen Y – are onboard the economic Titanic sipping our champagne but the iceberg of student loan debt is dead ahead! And as with the “unsinkable ship” if we don’t change our course navigation soon, there won’t be time to avoid the disaster.
If you do dig out of your debt and can afford a luxury trip – 2016 sees the launch of the Titanic II! And no matter what generation you’re part of – if you’ve got student loans – we’ve got an app for you! Check out Tuition.io’s free award-winning student loan tool to view, manage and optimize your debt. Also check out our recent blogs on the student loan crisis and the recent proposed legislation: