Student Loan Debt Has Gotten Out of Control Part 1: $1.28 Trillion

This is a 2 part series that covers student loan debt statistics and how it is affecting U.S. students.

Taking out a student loan to cover college costs is what many students were told would “pay for itself” after graduation. I’m sure that does hold true for some people, but as a nation, it looks like we may have gotten a little too far ahead of ourselves.

$1.28 Trillion

That’s how much student loan debt the country collectively holds, not even counting the disbursements that are going to be taking place within the next couple of weeks as the Spring semester starts up across the country. If history has proven anything, we can probably expect to add another $25-$40 billion before the middle of January.

If you need a clearer picture of how bad $1.28 trillion is, consider this:

• Back in 2004, the total was $260 billion
• The number of students enrolled in college has only gone up about 15% since 2004
• College prices have (on average) more than doubled in the last 12 years
• There is more student loan debt in the U.S. than any other type of non-housing debt
• About 90% of this debt is on the shoulders of those between the ages of 18-38
• You can’t walk away from it like every other type of debt

Building on the last point, you can discharge every other (legally acquired) debt you have in a bankruptcy….except for student loans. Rarely can they be discharged and only then you have to show that you will probably never have the income required to even service them. (Almost nobody passes this means test).

Student loans can destroy your credit, as even one late payment can drop your credit score dozens of points. This makes buying a house or car quite a bit more difficult, if not impossible for at least a couple of years.

The federal government is good about giving you options if you can’t afford your repayments, but so many people don’t or can’t take advantage of those programs. Student loans have a serious delinquency rate of almost 11%, which would be catastrophic to the economy if mortgage lending experienced that sort of rate.