The Student Loan Crisis Is Here, and It's Pretty Scary

Before you go, we thought you'd like these...
Before you go close icon

In 2007, we suffered from a mortgage crisis. Today, we may be suffering from a student debt crisis.

New figures from the Federal Reserve Bank of New York show that while student loan debt is growing, students' ability to repay their debt isn't.

Younger students and recent grads under 30 years old are among the hardest hit. The percentage of loans 90 days delinquent or more rocketed to 8.9%, up from 6.5% just one year earlier.

Source: New York Federal Reserve.

Why delinquencies matter
Numbers need context. With 8.9% of student loan balances 90 days delinquent or more, student loans stand as the worst performing loans. When JPMorgan Chase  reported its earnings last week, the company reported that only 0.8% of its credit card balances were 90 days delinquent.

Said another way, supposed "high-risk" credit cards are performing better than student loans, debt which is supposed to leave students with an education and better career prospects -- and higher earnings.

But students are falling through the cracks, graduating with an average of $29,400 in debt, unable to repay their loans.

Source: DonkeyHotey,

The only good news
If there's any good news to be found in a student loan crisis, it's that it won't have the same immediate, devastating effects as the housing crisis. Unlike housing, a student can't exactly drop in value. When the mortgage crisis hit, nearly all home values plummeted.

No bank can foreclose on a degree, so it's unlikely successful graduates with full-time jobs and on-the-job skills will suffer at all. For the 8.9% minority, however, this is, in fact, a real crisis. Failure to pay student loans could keep them from buying a home, getting a necessary post-graduate degree, or having anything left when lenders garnish their wages to cover their outstanding debt.

Without meaningful improvement in employment, student loan delinquencies will likely only rise from here. Rising delinquencies are a troubling glance into what's to come.

Make 2014 your best financial year
For those without any debt, it may be time to put that more toward retirement. Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk.

Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

The article The Student Loan Crisis Is Here, and It's Pretty Scary originally appeared on

Fool contributor Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

People are Reading