So, how’s that idea of loading up college kids on student debt working out? Let’s put it this way: The National Association of Consumer Bankruptcy Attorneys has been moved to publish a report entitled, “The Student Loan ‘Debt Bomb’: America’s Next Mortgage-Style Economic Crisis?”
Annual student borrowing crossed the $100 billion threshold for the first time in 2010, and total outstanding loans exceeded $1 trillion. “Evidence is mounting that student loans could be the next trouble spot for lenders,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. Gee, do ya think?
College seniors who graduated with student loans in 2010 owed an average of $25,250, up 5% from the previous year. And that doesn’t include the $34,000 average in student loans held by parents who have taken on debt.
States the report: “Of the Class of 2005 borrowers who began repayments the year they graduated, one analysis found 25 percent became delinquent at some point and 15 percent defaulted. The Chronicle of Education puts the default rate on government loans at 20 percent.”
Bankruptcy attorneys say student loans are smelling a lot like the mortgage market before the foreclosure crisis: “More and consumers [are] seeking their help with unmanageable student loan debt, and with no relief available.”
Don’t be surprised to see a move to forgive loads of student debt — with consequent losses of tens of billions of dollars to the U.S. Treasury. What gets my blood boiling is that the debt bomb was totally and utterly foreseeable — I’ve been ranting about it for a couple of years now. How friggin’ stupid do you have to be so soon after the real estate bubble to turn around and start lending indiscriminately to college students? However badly this pans out, we Americans have it coming — students for taking the loans, parents for letting them, colleges for jacking up tuition, and Uncle Sam for funding the madness. The avarice, stupidity and short-sightedness of this country know no bounds.
— JAB
