This week, Experian said student loan debt had grown from $833 billion a decade ago to “an all-time high of $1.4 trillion” now. Experian’s one of the three big credit bureaus, so it would know. It also found…
- The average student loan balance is up to $34,144.
- The average number of loans is 3.7 per person, up from 2.4.
- Consumers with student loans have an average credit score 25 points below the national average.
But here’s the interesting part: The highest balances aren’t from millennials. “Generation X has the largest outstanding balance — $39,802,” Experian found.
Separately, a new Consumer Financial Protection Bureau analysis of student loan repayment found “there has been an increase in the share of borrowers taking out loans on behalf of a child or grandchild” and “the share of borrowers younger than 25 has fallen from about 30 percent in 2002 to less than 15 percent in 2014.”
Conclusion: This isn’t a millennial issue anymore, and it was never something to ignore. More people are borrowing — whether to go back to school later in life or to help out their kids — and taking longer to pay back the loans. So what is the Trump administration gonna do about it?
Delinquency is down (barely) but balances aren’t
The Experian study shows the percentage of borrowers with delinquent student loans is down slightly from before the recession — 8.9 percent compared to 9.2 percent in 2007. But I would argue that’s a misleading stat.
Even though we’re slightly more likely to be making payments consistently, we’re paying off the loans slower. In other words, student loans are more of a drag on our lives and the economy now than they were before.
Says the CFPB:
Holding the amount borrowed constant, student loan borrowers whose repayment period began recently have fully repaid their loans at rates similar to those whose repayment period began fifteen years ago. However, 25 to 30 percent of the borrowers in the older cohorts do not pay off their loans within the standard 10-year repayment period, and the more recent cohorts appear to be following the same trend.
What’s happened is we’ve been given a number of options to make lower, more affordable payments — and we’ve gotten comfortable with that. Just like many people pay the minimum on their credit cards, leaving interest to rack up. We’re treading water, but the tide keeps rising, and a slip constantly becomes more perilous.
The CFPB explains: “The share of borrowers not making payments large enough to reduce their balances has increased, particularly among borrowers with loans smaller than $20,000. Some of this trend likely reflects the growth of income-driven repayment plans.”
Incomes are stagnant; we’re below the median household income we started the millennium with. Without higher incomes, we’re not going to make higher payments.
Meanwhile, in Trumptopia
Of course, Donald Trump thinks he’s doing a tremendous job with jobs and income and everything related to the economy. (Spoiler alert: He is not.)
Meanwhile, there’s been no movement on the student loan plan he proposed during the campaign — the one that would have required higher payments and granted loan forgiveness sooner than Obama’s repayment plans. The Washington Post, no ally of the Trump administration, even called it “the most liberal student loan repayment plan” since federal financial aid was a thing.
But apparently it was just more hot air to garner a few Bernie Sanders voters.
Instead, Donald Trump’s recent federal budget proposal suggested ending student loan interest subsidies, which would put students behind even before they graduate; he’s fought Public Service Loan Forgiveness for America’s dedicated firefighters, police officers, and teachers; and he’s stripped regulations that protect borrowers from for-profit colleges and the loan servicing and debt collection industries.
Trump’s original plan, for once, would have been a good start toward something. But not a solution.
My problem with student loans is a lot like my problem with Obamacare. Everybody wants to treat the symptoms instead of the sickness. The solution isn’t to make student loan payments or insurance payments easier to swallow. It’s wholesale reform that actually reduces the costs of college and care.
Unfortunately, the gridlock in Washington has made even incremental improvements impossible. There, too, Trump is just a symptom of the problem. He’s really the biggest symbol of it. It’s all about keeping voter approval in the short term, looking good on TV, and never worrying about tomorrow — instead of actually improving things for Americans.
Article last modified on September 1, 2017. Published by Debt.com, LLC .