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Student loan debts are ‘unsustainable’

Outstanding student loan debt is giving economists a sense of deja vu. They fear a student loan bubble similar to the housing bubble that helped tank the economy in 2008.

A few facts:

  • The delinquency rate for student loans made in the past two years is 15 percent - up from 12.4 percent in the 2005-2007 period.
  • Subprime mortgage delinquencies stood at 15 percent in 2007.
  • 19 percent of American households have a student loan debt.
  • Over the last 10 years, tuition rose 60 percent at private colleges and 104 percent at public colleges.
  • The average student loan was $27,253 last year, up from $17,233 in 2005.
  • Total outstanding student loans top $1 trillion. That's more than Americans owe on credit cards.

What happened should not be a surprise. To make college more accessible, Congress made student loans more available, just as it had encouraged home ownership for everyone.

But the downturn in the economy has increased delinquencies, according to Andrew Jennings, chief analytics officer of FICO, a credit rating service.

"When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default. There is no way around that harsh reality."

The United States and its students need to rethink higher education. Not every person is college material, and not every degree is a sound investment.


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