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Parents Feeling the Student Loan Squeeze

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Total household debt climbed to a record $13 trillion in 2017. One factor driving overall American indebtedness higher is the ever-increasing burden of student loans.

A recent article in the New York Times focused on three charts that illustrate the ever-increasing toll of the student loan bubble – and it’s not just impacting students. Parents are increasingly feeling the squeeze.

According to the latest data,  student loan debt stands at a staggering $1.4 trillion, owed by some 44.2 million borrowers. According to data from the National Postsecondary Student Aid Study, the average debt load at graduation for the 2015-2016 school year came in at $30,301.

Millions of American are struggling under the crushing weight of student loan debt. Defaults are on the rise and student loan debt is one of the biggest factors driving a growing trend of millennials struggling to transition into adulthood. The average student loan borrower pays $351 per month to service those loans.

Student loan debt has actually plateaued, hovering in that $30,000 range for the last three years. That may seem like good news, but as the NYT points out, one of the primary reasons student loan debt has leveled off is that students have maxed out borrowing under federal loan programs. As a result, parents are taking on increasing levels of debt to help their kids through school.

In fact, student loan debt is actually becoming a problem for baby boomers as they shuffle toward retirement.

A Department of Education program called Parent Plus allows parents to take out loans to help pay for their kids’ schooling. The program has loans outstanding to more than 3 million Americans. The number of families enrolled in Parent Plus has increased by more than 60% since 2005. Borrowers in the program owe roughly $77.5 billion – an average $22,000 per borrower, according to Education Department figures.

According to the NYT, roughly two-thirds of Plus borrowers were taking loans on behalf of students pursuing bachelor’s degrees who had reached their loan limit in their senior year.

As we’ve reported in the past, government student loan policies have created perverse incentives and pushed the cost of college ever upward. Those costs are not coming down. Data cited by the Times shows more students opting for lower-cost public universities as private school tuition spirals out of reach. Analyst Mark Kantrowitz at SavingForCollege.com told the NYT parents are realizing they just can’t afford that more expensive college.

The shift from private to public is of concern mainly because it is a sign of financial pressure, a kind of canary in the coal mine.”

Now consider this. The federal government guarantees these trillions of dollars in outstanding student loans. That means ultimately, the US taxpayer hangs on the hook for student loan defaults.

The student loan debt is emblematic of a larger problem in America. When the student loan bubble eventually pops, it will add to the already massive federal debt burden. It’s just one more example of abuse that points to the eventual collapse of the US dollar.

The bottom line is that the student debt bubble will ultimately impact US markets and average Americans. You can learn more, and how to prepare yourself, in Peter’s white paper The Student Loan Bubble: Gambling with America’s FutureGet the free download HERE.

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