Student loans will surpass the $100 billion mark and the outstanding balance will exceed $1 trillion for the first time, according to a worrying new report.
The New York Federal Reserve's latest report on Household Debt and Credit finds that American students’ debt and credit card debt will be almost equal.
However, unlike credit card debt, student loan debt survives bankruptcy: The credit risk means young people will start adult life deeper in debt, a burden that could weigh down the economy in the future.
"Students who borrow too much end up delaying life-cycle events such as buying a car, buying a home, getting married (and) having children," says Mark Kantrowitz, publisher of FinAid.org, USA Today reports.
"It's going to create a generation of wage slavery," says Nick Pardini, a Villanova University graduate student in finance.
Pardini has warned on a blog for investors that student loans are the next credit bubble — with borrowers, rather than lenders, as the losers, reports USA Today.
Even when adjusting for inflation, students are borrowing at roughly twice what they did a decade ago, and total outstanding debt has doubled in the past five years alone, the data shows.
In 2010, full-time undergrads borrowed an average of $4,953, a 63-percent jump from the previous decade even when inflation is accounted for.
The report was published on the New York Fed’s website: http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q22011.pdf
