Just like the housing market, the Federal governement tries to make college “more affordable.” And just like house prices (and rents), college tuitions and student loans have skyrocketed.
Tuitions since 2008 have boomed while wage growth has remained below where it was in 2008. But notice the growth in tuition starting in late 2010 when The Obama Administration “federalized” the student loan system. The Federal government now profits immensely from both interest on loans it makes directly to students.
(Bloomberg) — While Wall Street and U.S. President Donald Trump tout news of a booming stock market and low unemployment, college students may be quick to roll their eyes. The improved economy has yet to mean higher wages for graduates already struggling to pay down massive debt, let alone ease the minds of students staring down the barrel of six-digit loan obligations yet to come.
Federal student loans are the only consumer debt segment with continuous cumulative growth since the Great Recession. As the costs of tuition and borrowing continue to rise, the result is a widening default crisis that even Fed Chairman Jerome Powell labeled as a cause for concern.
Student loans have seen almost 157 percent in cumulative growth over the last 11 years. By comparison, auto loan debt has grown 52 percent while mortgage and credit-card debt actually fell by about 1 percent, according to a Bloomberg Global Data analysis of federal and private loans. All told, there’s a whopping $1.5 trillion in student loans out there (through the second quarter of 2018), marking the second-largest consumer debt segment in the country after mortgages, according to the Federal Reserve. And the number keeps growing.
Delinquencies escalated in the wake of the Great Recession as for-profit colleges pitched themselves as an end run around low-paying jobs, explained Judith Scott-Clayton, a Columbia University associate professor of economics and education. But many of those degrees ultimately proved useless, leaving graduates with debt they couldn’t pay back.
Students attending for-profit universities and community colleges represented almost half of all borrowers leaving school and beginning to repay loans in 2011. They also accounted for 70 percent of all defaults. As a result, delinquencies skyrocketed in the 2011-12 academic year, reaching 11.73 percent.