Student Loan Debt Spikes 84 Percent Since Recession
Sep 10th, 2014 @ 8:53 PM by Amber Nelson
The total amount of student loan debt held by Americans hit a new high recently, according to credit bureau Experian, and that debt is affecting both young and old.
Americans now carry a total of $1.2 trillion in college debt, an all-time high and an 84 percent increase since the Great Recession. That debt burden is spread out across 40 million people, an increase from 29 million in 2008. Every borrower has at least one student loan but the average borrower, however, has approximately four student loans, nearly double the roughly two-and-a-half from six years ago. The average balance for each student loan borrower is now $29,000, up from $23,000 before the recession.
For those just entering college, taking out student loans can be a chance to build up one’s credit. Or it might lead to major damage to a credit score. “Student loans are the only credit vehicle where a lender continues to extend credit year after year without knowing the person’s ability, or even willingness, to pay,” said Michele Raneri, vice president of analytics at Experian. Experian’s director of public education added, “Missing payments affects your credit just like any other debt, [and] payment history is the most important factor in credit scores.”
The older echelons of Americans are also dealing with the increase in student debt. The Government Accountability Office reported that 4 percent of households headed by someone 65 or older still carry student loans. While 4 percent may not seem significant, that small fraction’s total college debts add up to $18.2 billion, up from $2.8 billion in 2005 among that age group. Seniors in some cases are paying for their own college expenses if they went back to school late in life or in many cases they are carrying loans for their children and even grandchildren. The danger in rising student loan debt among seniors is that they face the possibility of those loans taking away from the Social Security checks and other investments, cutting into their ability to provide for themselves in retirement.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.