Student Loans Crisis Looming, According to Leading Financial157 views 2012-09-26 02:07
In the article “Student
Loans Now Growing at Faster Rate than Mortgage Debt During U.S. Real Estate
Boom Years,” Lombardi states that earlier this year, student debt crossed
the $1.0-trillion mark—more than consumer spending on credit cards.
“The average loan for students has skyrocketed 55% to
$24,301 since 2005,” says Lombardi.
Lombardi reports that in 2001, there were 794,000 households
that owed at least $50,000 in student loans: “Today, that number has ballooned
to over three million households,” he notes.
Lombardi believes that the New York Federal Reserve Bank is concerned
about this potential credit
crisis because the rate of growth in mortgages during the crisis did not
accelerate as fast as student debt is growing right now.
“In other words, the spectacular housing bubble that caused
the economic slowdown we are still in did not grow as fast as student debt is
growing today,” Lombardi explains.
Lombardi says that add to this mixture the fact that student
tuition costs have more than doubled since 1985 and this creates a heavy
“To complete the recipe for this disastrous credit crisis, add in the weak job market with the fact that incomes are not keeping up with inflation—never mind tuition costs—and the credit crisis is complete,” says Lombardi.
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