The student loan debt crisis wages on for millennials who now find themselves $1.5 trillion in debt, and it's not going anywhere anytime soon. So why is this happening so rapidly and why can't anyone seem to get their student loans paid off? We have just the insight you need to start uncovering the student loan debt crisis to help fuel your fire and pay off your student loans.
It’s official. Young Americans are drowning in student loan debt. At the end of 2018, 18-29 year-olds found themselves exceeding a debt of $1 trillion and, since nearly 1 million student borrowers end up defaulting each year, we know that half of that is not being repaid (Yahoo Finance). Even more devastating, it’s been more than a decade since Americans have faced debt levels this high, Bloomberg reports.
Nevertheless, it seems as though millennials are renting homes or apartments for longer durations of time than previous generations as they wait to purchase their own home. Even more troubling, missing student loan payments will complicate the prospect of future mortgages due to the damage done to their credit profile.
While mortgage debt increases by 3.2%, student loan debts have grown up to 102% higher. Both Yahoo Finance and Business Insider report that at this rate, approximately 40% of outstanding debts are likely to default by 2023. This is an astronomically high number, especially when we consider that mortgage defaults at the height of the financial crisis only reached 11.5%.
However, since millennials represent $200 million of spending power, and are expected to overtake Baby Boomers as the largest living generation in the US with spending power, this undoubtedly and, negatively, will affect America’s economic growth.
This phenomenon is even more prominent as young adults graduate with weak job prospects and high educational debt. Additionally, some college graduates are delaying marriage plans in order to pay off their loans.
After analyzing 11,000 award letters (by the New America Foundation), it was discovered that approximately one-third did not clearly distinguish grants and scholarships from debt.
Many colleges didn’t even use the word “loan” but rather “award.” This may be related to why an earlier Brookings study discovered that 28% of first-year student borrowers weren’t aware that they had federal loans. And the majority of student loans are federal loans.