Student loan debt default rises in a strong labor market

Posted By on December 16, 2017

With all the buzz around Bitcoin and bubbles, the really big financial crisis being somewhat overlooked is Student Loan Debt. The number of Americans struggling to pay back the money they borrowed for their education is mindboggling.

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The WSJ reported that Nearly 5 Million Americans are in Default on their Student Loans … and there are many who are barely keeping their debt up to date. That 5,000,000 number “in default” is shocking at a time of we have “a strong labor market — unemployment is at a 17-year low—and carries long-term consequences for borrowers and the economy.”

What happens when the next recession hits? (FYI, we are overdue if past history is our guide)

Nearly 5 Million Americans in Default on Student Loans

Number surges in recent years despite strengthening economy

The number of Americans severely behind on payments on federal student loans reached roughly 4.6 million in the third quarter, a doubling from four years ago, despite a historically long stretch of U.S. job creation and steady economic growth.

In the third quarter alone, the count of such defaulted borrowers—defined by the government as those who haven’t made a payment in at least a year—grew by nearly 274,000, according to Education Department data released Tuesday.

The total number of defaulted borrowers represents about 22% of the Americans who were required to be paying down their federal student loans as of Sept. 30. That figure has increased from 17% four years earlier.

The money they owe is becoming a bigger share of total outstanding student debt in repayment. Defaulted student loans totaled $84 billion at the end of the quarter, or 13% of the roughly $631 billion that borrowers were required to be paying down.

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  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.