The Good, The Bad And The Ugly On U.S. Student Debt

A recent report published in collegedebt.com has the current student debt in the U.S. standing at $1.4 trillion. According to a new analysis published by Moody’s, student debt obligations are growing much faster than credit card debt or auto loans and the average salaries for recent graduates are not keeping up. The average student debt in the United States has increased to about $29,000—a 60% jump from about $18,000 in 2007 and doubling the amount since 2009, according to the Department of Education.

Student loans now needs an estimated $160 billion in annual payments in order to cover its liability, $40 billion greater than Amazon's annual revenue and larger than the combined yearly sales of Home Depot and Lowe's.

Statistics indicate that about one in five borrowers owe more than $50,000 in student loans, and 5.6% owe more than $100,000. Reasons for this staggering figure include switching majors, transferring to a college that won’t accept credits, or stopping and restarting school. In addition, many students don’t take their loans seriously enough and use the student loans to live way beyond their means.

The most common reason for six-figure student loan debt is students pursuing graduate, doctoral, or other professional degrees. The average student graduating from dental school has racked up $241,097 in debt, according to the American Student Dental Association while the average debt for a law school grad is $125,000 according to the American Bar Association.

The Good and the Bad

The ballooning student loan debt can be seen from both positive and negative viewpoints. With more out of pocket money going to pay off their loans, Americans between ages 30 and 39 who have historically been the biggest spenders, have fewer funds to expend on other items, leaving tremendous inventories in major store chains. This change in spending patterns has been blamed for sluggish retail sales in the U.S. and globally.

Moody’s believes that the situation will only get worse for retailers, even with potential government intervention to help solve the problem. According to the rating agency, the “velocity of growth tied to student loan debt is ‘staggering,’ having more than doubled from $580 million in 2008.”

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