Are Student Loans The Next Big Bubble To Burst?

Many have claimed that outstanding student loan balances, which seemingly continue to grow, may be the next big bubble to burst that may have a material impact on the U.S. economy. As a result, I thought it would be appropriate to conduct some research into the current state of the student loan market and assess how large of a potential future problem this may pose.

According to an article by Mark Kantrowitz on Savingforcollege.com, there was a total of $1.6 trillion in student loan debt as of the end of the first quarter of 2019. To put this in context, the amount of student loan debt in the U.S. is larger than the 2019 estimate of gross domestic product (GDP) of 173 of the 186 countries/territories tracked by the International Monetary Fund (IMF). It also represents approximately 7.5% of the GDP in the United States. The amount of student loan debt has also grown in recent years. For example, in 2014, student loan debt totaled $1.3 trillion and thus has increased by approximately 23% in less than 5 years. Looking ahead, it is estimated in the same Savingforcollege.com article that student loan debt outstanding will increase by another 25% to reach a total of $2 trillion by the end of 2023 / beginning of 2024. To help put these increases into perspective, average hourly earnings in the U.S. (while they have been accelerating more of late) have risen by an average of 3% on a year-over-year basis over the past 30 years according to a March 8, 2019 MarketWatch article by Jeffry Bartash.

The amount of student loan debt outstanding is currently spread across 45.1 million borrowers. Since there are approximately 329.1 million people in the United States according to 2019 data from the United Nations, this means that roughly 1 in every 7 people in the United States has an outstanding student loan balance. Given the $1.6 trillion in outstanding student loan debt, this equates to a per borrower average balance of $35,477.

A few questions arise after reviewing these statistics:

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Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust® Unit Investment ...

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