The lousy economy is taking an unprecedented toll on recent college graduates, according to a report from the Federal Reserve Bank of New York, as reported by Bloomberg on March 1.
A full 35% of college graduates under the age of 30 is now in a position that they are unable or unwilling to make the mandatory payments on their student loan debt.
Student loans are the only kind of consumer debt that has continued to grow throughout the Great Recession. While other types of debt, like credit cards and car loans, have been paid down by cash-strapped consumers, the amount of educational debt has increased to the point that it now surpasses car loans and credit card balances.
Educational debt has tripled since 2004, to nearly $1 billion, and ranks only second behind mortage debt in most households.
Nearly 17% of educational borrowers are more than 90 days past due on their debt, and the numbers are growing dramatically worse for the under-30 age group.
When the economy first turned down in 2008, many people who lost jobs elected to go back to school and take advantage of fairly-lenient lending standards at the time.
Now, however, they are entering the work force with heavy burdens of debt, and the employment situation has not dramatically improved. The high-paying jobs that they need in order to make their loan payments are not materializing.
Watch for the student loan market to be the next big disaster. Shady schools luring naïve students into unreasonable loan balances are going to be the next wave of investigations, reminiscent of the subprime mortgage market.
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