August 24, 2015

HIGHER EDUCATION BUBBLE UPDATE: Millions A Year Behind On Student Loans.

Nearly 7 million Americans have gone at least a year without making a payment on their federal student loans, a high level of default that suggests a widening swath of households are unable or unwilling to pay back their school debt. As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this past week. That was up 6%, or 400,000 borrowers, from a year earlier.

That translates into about 17% of all borrowers with federal loans being severely delinquent, a share that would be even higher if borrowers currently in school who aren’t yet required to repay were excluded. Millions of other borrowers are months behind but haven’t hit the 360-day threshold that the government defines as a default.

Severe delinquencies are rising despite the sharp drop in unemployment over the past year and a big push by the Obama administration to enroll borrowers in programs that lower their monthly payments.

Plus: “The education mess is a lot like the health care mess: the combination of federally mandated costs and controls, runaway cost inflation driven by insiders who keep jacking up the price, perverse market incentives in a warped marketplace, dysfunctional mandates, guild controls and crony regulations, all have produced a system in which costs are increasingly out of line with true value—and with society’s ability to pay.”

Who could have seen this coming?

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