According to the Federal Reserve Bank of New York, household debt has risen steadily for 11 consecutive quarters
Household debt is on the rise in the United States. Total household debt is now approaching $13 trillion and has surpassed the previous peak of $ trillion in 2008. The largest and fastest-rising debt for households is student loan debt. The increasing amount of student loan debt is alarming, especially since student debt delinquency is also rising.
How Did We Get Here?
As the U.S. transitions away from a manufacturing and goods-based economy to a service and technology-based one, the need for higher education has increased. It has become more important for students to get post-secondary education to remain competitive in the modern workforce.
However, as demand for higher education has increased, so have the costs. In 1973, the average one-year tuition at a private university or college was just under $10,000 and an in-state public institution averaged around $2,000 in today’s dollars. The average one-year tuition for a private university or college is now over $33,000; in-state students attending a public university or college pay just under $10,000.
Increasing Student Loan Debt and Defaults
The dramatic increase in higher education costs has resulted in a steep rise in student borrowing. The average college student now owes more than $37,000 in student loans. These borrowers should expect to pay around $450 per month on a 10-year loan. Many graduates face daunting loan balances of more than $100,000, with monthly payments of more than $1,000. Luckily, the U.S. job market is strong, and with starting wages for college graduates averaging just under $50,000 per year, borrowers should be able to handle these payments.
However, what if recent graduates are not able to find jobs that pay well enough to cover the cost of their student loans?