US Banks are actually starting to feel a genuine pinch of the student loan crisis as the number of students who default on their own debt is skyrocketing. In just the first two months of 2013, financial institutions have had to create off a lot more than $3 billion in student loan debt, a 36% increase within the same period this past year.
The data comes thanks to a report through the credit reporting agency Equifax, that also shows that while part of the increase might be attributed to continuing economic malaise, additional factors play a role too. The borrowing volume expires over the past year weight loss people secure loans to return to school to wait out an inadequate job market and as college tuition continues to grow.
The focus on student loan debt has been intense since the announcement by the newly formed U.S. Consumer Financial Protection Bureau this year that the total borrowed amount has surpassed $1 trillion. The pressure is unlikely to ease in the near future, especially since the interest rates charged on federally subsidized Stafford loans are set to double in July.
The cost of earning a 4-year undergraduate degree has gone up by 5.2 percent per year in the last decade, according to the CFPB, forcing more students to get loans. While other kinds of debt transpired, student loan debt continued to increase through the financial crisis.
Delinquencies have spiked in the last eight years, about 17 percent of the nearly 40 million student loan borrowers at least 90 days overdue on their repayments, a February report from the New York Fed Bank showed.
In yesteryear, CFPB has stressed that top levels of education loan debt will have a negative impact on the overall economic health of the nation. Delinquencies on student loans are reported towards the credit monitoring agencies, and this could keep borrowers from making purchases on credit later on C including such big ticket items like a car or perhaps a house.
To combat this problem, the agency is trying to introduce a number of oversight measures, including closer monitoring of education loan servicing companies and dealing with private lenders to rejigger the borrowers’ repayment schedules to allow for more flexibility.
Groups such as the New America Foundation, a nonprofit public policy institute, have said the present student loan repayment product is too complicated for borrowers, and that an income-based repayment system could simplify the process. Some students, they say, simply don’t know how to enroll in the various repayment options or put repayment off and away to take care of more urgent bills for example credit cards and rent.