Student loan debt is already reaching crisis levels in the United States, as borrowers are struggling to pay back the money they used to obtain higher educations. Borrowers were already defaulting on their debts in record numbers heading into this year, and the first three months of 2013 were the worst on record for loans going bad, CNBC reports:
Credit-rating firm Equifax said $3.5 billion in government and private student loans went bad in the first three months of 2013, the most since the company began keeping track. The U.S. Department of Education said 6.8 million federal student loan borrowers are now in default, representing $85 billion in debt. And the department’s systems for collecting the bad loans are struggling to keep up.
The cost of college has sextupled in the last 30 years, pushing more and more students toward both government and private loan programs to finance education. But student loans are one of the only forms of debt that can’t be discharged in bankruptcy court, meaning that many borrowers will never have a way out from under their education debt.
The burden of student debt is having far-reaching effects on the broader economy. The debt is being securitized much in the way mortgages were before the housing crisis, leaving analysts wondering if the country is inflating another debt bubble that could threaten the economy. It is also preventing young graduates from purchasing homes and other goods, lengthening the downturn in housing and the pain of the slow economic recovery. And student loans are increasingly becoming a problem for older Americans too, as those who haven’t yet paid off their own debt or took on loans to finance their children’s education are also being crushed.