Is the student loan debt bubble popping?

Federal Student Lending Swells
By JOSH MITCHELL

Josanne Baxter-Engish, at home in California with her son, above, said she stopped repaying $2,900 in student loans because she can’t afford it.

The federal lending program designed to make college education available to everyone is creating a pile of debt so large it is fanning worries that it has become too easy to borrow too much.

U.S. student-loan debt rose by $42 billion, or 4.6%, to $956 billion in the third quarter, the Federal Reserve Bank of New York said Tuesday. Overall household borrowing fell during that period.

Payments on 11% of student-loan balances were 90 or more days behind at the end of September, up from 8.9% at the end of June, a rate that now exceeds that for credit cards. Delinquency rates for all other consumer-debt categories fell or were flat.

Nearly all student loans—93% of them last year—are made directly by the government, which asks little or nothing about borrowers’ ability to repay, or about what sort of education they intend to pursue.

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