Are Student Loans The Next Big Bubble To Burst?

What happens if the borrower is not able to repay their student loan? Borrowers of federal loans do have options if they are having difficulties repaying their loans as they can postpone certain payments through deferment or forbearance. Interest does accrue during these postponements though unless the loan is subsidized. According again to NerdWallet, as of their September 26, 2019 article, there are 3.4 million borrowers with federal loans in deferment, 2.7 million borrowers with federal loans in forbearance and 5.2 million borrowers with federal loans in default. You may be surprised to realize that balances remaining on federal income –driven repayment plans are forgiven after a certain period of time – generally 20 or 25 years – depending on the particular type of plan. If you are wondering who bears the brunt for the amount forgiven in these situations, consider that approximately 92% of student loans in the U.S. are owned by the U.S. Department of Education according to a study by MeasureOne in December of 2018.

Given that student loans now account for the second largest component of U.S. household debt, behind only housing related loans, we will continue to monitor the state of the student loan market as a potential “bubble threat” given the implications on the U.S. economy as a whole and similarly, will also monitor the health of the U.S. economy given its implications on the state of the student loan market.

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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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