Experts Still Worried About Student Loan Debt

In recent months, the amount of money being borrowed by consumers has grown considerably, and is now approaching pre-recession levels in some cases.

As the effects of the recent recession continue to wane, the nation has seen upticks in consumer credit usage, which some experts say may be an indicator that consumers are once again feeling comfortable dealing with debt as a result of their improving financial standing, according to a report from Bloomberg Businessweek. However, some say that most of that credit hasn’t been in the form of rising credit card balances or increased mortgage lending.

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Instead, these analysts believe that much of that increase is the result of consumers heading back to school, and taking out education loans to do it, the report said. Federal statistics don’t show exactly how much of the nation’s non-mortgage nonrevolving debt is comprised of student loans, but that figure makes up 68 percent of all outstanding balances, and there are a number of estimates that show the nationwide total of student loan debt is now worth more than $1 trillion. This change comes even as consumers have kept their credit card borrowing largely under control.

“You see this enormous growth in credit but you don’t see enormous pick-up in consumption,” Dan Alpert, managing partner at the investment bank Westwood Capital, told the news agency.

More problematically, a significant portion of those individual balances have gone some amount of time without receiving a payment, the report said. In all, it’s estimated that 27 percent of student loan balances are behind on payments. Alpert and other experts believe that students carrying large amounts of debt when they leave college can have a sizable negative impact on not only their ability to gain financial independence in their new adult lives, but can also have an effect on the economy, as they likely will not be able to spend as freely as they would have otherwise.

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These days, the average college student graduates with more than $25,000 in outstanding student loans, as well as thousands more in credit card debt spread across several accounts. In addition, many may have had to rely not only on federal loans to pay for their education, but also those from private lenders who will likely charge higher interest rates.

Tagged as: debt, student loans

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