Trillion Dollar Debt Bubble about to Burst?

Black Swan

Former US Secretary of Education William Bennett claims that the 2nd largest debt of Americans today is in student loans, amounting to approximately $1 trillion dollars at the close of 2012. About 21 million students are in colleges and universities now, he claims half will not finish, and many of those that do graduate may be either unemployed or underemployed, and deep in debt. How will they pay their debt, and if many default, what happens to the US Economy?

LuckyLloyd

Black Swan wrote: »

Former US Secretary of Education William Bennett claims that the 2nd largest debt of Americans today is in student loans, amounting to approximately $1 trillion dollars at the close of 2012. About 21 million students are in colleges and universities now, he claims half will not finish, and many of those that do graduate may be either unemployed or underemployed, and deep in debt. How will they pay their debt, and if many default, what happens to the US Economy?

Seems like this would be the key point of any discussion on the issue. Half will not finish is a fairly serious claim. What is that projection based on?

As for the suggestion that 'many' will be underemployed or unemployed - how many? How many in five years? What average income level is generally required for student loans to be cost effective on an individual by individual basis?

KyussBishop

Good related Slashdot thread here:
http://news.slashdot.org/story/13/05/12/2136219/how-colleges-are-pushing-out-the-poor-to-court-the-rich

This student debt crisis is (if I recall correctly) only second to the mortgage crisis in the US, though I don't know much in-detail about it; it has been a long time coming home to roost from what I do know though.

Be like Nutella

Average student loan debt owed in the US: $24,301

Amount of federal student loans owed directly to the US government: $864 billion

Amount of student loans owed to private lenders, like banks: $150 billion

http://www.guardian.co.uk/money/2013/apr/03/student-loan-debt-america-by-the-numbers

I don't think this is a major issue for the US economy or the global economy. It will drip over time and the private exposure is only 150 Billion between 7 banks fairly evenly split all of which can take a big hit in this area and survive fine.

There WILL be employment again, at some point. There will be growth - the world hasn't ended and the banks in question are more than aware of their position. The Government can just print more money at a cost and spread the hit over time until growth kicks in again. The key is for the Gov to renegotiate loans now and push the private sect to do the same to get as many of these students qualified and ready in the workplace for when growth kicks in again. You grow value in your economy when times are good and then you use some of that value when times are bad - no matter how you do it - it doesn't matter as long as you get growth happening again. Austerity is the mother of all mistakes.

Black Swan

LuckyLloyd wrote: »

Half will not finish is a fairly serious claim. What is that projection based on?

The statistics for America seem to vary between public and private, from year to year, and from source to source. For example, the Organization for Economic Cooperation and Development reported that only 46% "completed college once they started it" in 2010, while Harvard Graduate School of Education reported that only 56% finished a 4-year degree in 6 years at the close of 2011. These are not projections or estimates, rather based upon historical records of completion.