FinSite
US Student Loan - A Quick Overview
2014-12-13 20:30:00
Student loan in the United-States are rising at a dramatic pace reflecting constantly increasing cost to attend colleges. The total amount of student loan has increased by an annual rate of +12% from the end of 2004 (USD 346 billion) to the end of 2013 (USD 1,080 billion). It now stands at USD 1,126 billion (September 2014).

This increase is driven in equal proportions by the number of student going through student loan to fund their college fees and by the average amount of these loans.
The number of student going through student loan has increased by 6% per annum from 2004 (23 million of people) to 2013 (39 million). This reflects for a part a positive trend as more and more young people are attending shool and universities. However, this number in increasing just slightly above +2% per annum - accounting for less than half of the 6% increase
The average amount has increased over the same period of time by 5.9% per annum moving up from USD 15K to USD 25K.

The graph below shows the evolution of prices for tuition and school fees compared to overall inflation. Since 1980 the overall prices have been multiplied by 3, but schooling and child care costs have been multiplied by almost 10.

USEvolutionSchoolingCosts"

Out of 10 senior students who graduated from public and nonprofit colleges in 2013, 7 where having student loans with an average amount of USD 28,400.

Close to 90% of these student loans are done through federal student loans.

This increasing level of student debt, unlike other debt, is showing an increasing % of deliquency albeit it is virtually impossible to default on a federal student loan as the government has a lot of power to recover the money.

US_Student_Loans"

This situation is not only a risk in term of debt not being repaid but also for the economy has young people, facing the burden of student debt, has less money to spend on other things. In addition it also reduce their capacity to get a mortage credit which has a negative impact on home construction - one of the major sector in the US economy.

But the most critical point on a long term view is that this situation may result in unequal opportunities according to the wealth of the family student come from.