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Feds Claim New Student Loan Data Is Good News; Wait Until You See the Bad News

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The feds recently released new data on student loan debt. The Department of Education press release claimed it showed “promising repayment trends.”

If these latest numbers are good news, I’d hate to see the bad.

As the Foundation for Economic Education (FEE) pointed out in its blog, total student loan debt increased at a healthy clip last year:

The total amount of outstanding direct student loans stood at $855 billion at the beginning of the first quarter of 2016, distributed among over 30 million recipients. (This total does not include loans still outstanding under the now-discontinued FFEL program, which guaranteed private-sector student loans.) The total direct loan amount outstanding is up roughly 15% over a year ago, doubtlessly the result of relentless tuition increases.”

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The numbers also reveal that 46% of student loans are not currently being repaid. That doesn’t include debt held by students still in school or within the six-month grace period after graduation. Here’s a breakdown by the FEE:

Ten percent of student loans are delinquent, meaning the borrower has missed payments for thirty days or more. Another 13 percent are in deferment, which means payments have been postponed for various reasons. Another 14 percent are in forbearance, meaning the borrower has encountered economic hardship and had their payments suspended or reduced. The remaining 8 percent are in default.

So, what exactly is the good news the US Department of Education is crowing about? The number of loans in repayment is up slightly to 54%.

Stop and think about this for a moment – more than half of student loans aren’t actually being repaid (if you include loans within the grace period or held by students still in school) and we’re supposed to accept this as good news. And if you peek just a slight bit deeper, you find that despite the Department’s claim of “promising repayment trends,” the momentum is actually moving in the other direction:

While delinquency rates dropped, overall loan nonperformance increased. Most notably, student loans in default (defined here as loans more than 360 days delinquent) increased 31 percent in the past year, to $56 billion. This far outpaced the 20 percent increase in the outstanding balance for all borrowers not in school or a grace period.”

All of this bodes ill for the average American. Total taxpayer exposure, including government guarantees for private loans, stands at more than $1.3 trillion and is increasing at about $2,726.27 every second. A case currently working its way through the federal court system could pave the way for student loan debtors to discharge their obligations through bankruptcy. If that happens, the leaky bubble may well blow up completely.

To learn more about the student loan debt crisis and how it may impact you directly, get Peter’s exclusive white paper The Student Loan Bubble: Gambling with America’s Future. You can download it free HERE.

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