As a record number of borrowers default on their student loans, a new poll shows that those who haven’t paid off their loans want their lenders to forgive the debt.
More than 80 percent of those who participated in the online survey said the government should participate in student loan forgiveness. To fund these bailouts, 54 percent of the respondents said that the government should eliminate the oil and gas company subsidies and increase payroll taxes on business owners.
This comes as the Federal Reserve Bank of New York announced that total student loan debt has passed $1 trillion. The percentage of delinquent borrowers is also on its way up; the current rate of student loan default is 8.8 percent, the highest it has ever been. The current delinquency rate is nearly 9 percent but could be as high as 18 percent when grace periods and forbearances are factored in.
Student Loans and Unemployment
Of the 20 million Americans attending college annually, about 12 million of those borrow money to cover the costs. With the average college graduate carrying more than $25,000 in student loan debt, it’s easy to see why the default rate is so high. This is especially true since the most recent jobs report shows only incremental increases in the numbers of available jobs.
Analysts say that while the economy may be slowly on the mend, heavy student loan burdens could stress future growth. Typically, people under 30 account for a majority of the student loan debt in the United States. The unemployment rate for workers ages 20 to 24 is 13.5 percent and 9.3 percent for those 25 to 29. Many of these workers start at lower salaries, and that typically means a lifetime of lower salaries, experts said.
Potential Economic Effects
William Brewer, president of the National Associate of Consumer Bankruptcy Attorneys, told U.S. News & World Report that student loan debt has a potential to impact this country’s future competitiveness. The cost of an education may keep people away. He sees an emerging crisis that could rival the home mortgage crisis. That’s because these heavily indebted consumers have a harder time getting mortgages and other financing.
“The people who of course have to get student loans are those who don’t have wealthy families,” Brewer stated. “To the extent that education is a great equalizer between the haves and the have-nots, that will suffer as well.”
Right now, all eyes are on the presidential candidates to sift through these issues. Early in his administration, President Barack Obama attempted to regulate for-profit colleges and career training programs, which have a higher percentage of student loan defaults. Students at for-profit colleges were four times more likely to take out private student loans than those at traditional colleges and universities, studies show. Obama’s plan has not gone through. Now, presidential candidate Governor Mitt Romney vows to keep federal student loans in check but said he does not support student loan forgiveness.