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Wednesday, April 1, 2015

Federal Report: The College Debt Bubble Is Collapsing

Mac Slavo

With all of that job creation being claimed by the Obama administration and disseminated by mainstream media outlets as signs of a sustained recovery you’d think most college graduates would have no trouble keeping up with their bills.

But new data released by the Department of Education tell a different story.

According to the report as many as 33% of American college grads with student loan debt are now in delinquent status on their repayments.

About one-third of borrowers with federal student loans owned by the U.S. Department of Education are late on their payments, according to new federal data.

The figures, released by the Education Department on Thursday, are the first comprehensive look at the delinquency plaguing those who hold federal student loans.

By the new metric, which the department has never used before, roughly 33 percent of borrowers were more than five days late on one of their federal student loansas of Dec. 31. (Since the department only released individual figures for its four largest contractors, rather than a total percentage, however, the actual figure may be a few percentage points higher or lower.)

Previous measures had put the delinquency rate much lower, masking the true amount of distress among borrowers trying to make good on their taxpayer-backed debts.
There are currently 41 million Americans who collectively have about $1.1 Trillion in loans outstanding. That means about 13.5 million Americans are currently delinquent on roughly $350 billion in student loan debt.

Several years ago we noted that as many as 85% of broke and jobless college graduates had no choice but to move back in with their parents after they graduated. That was in the midst of the worst recession since the 1930s, but the latest figures from the Department of Education suggest things are just as bad, if not worse, even though the government says our unemployment rate has dropped from 10% to 5.5% in that same time period.

So where are the jobs? Well, according to a recent article from the Washington Post, officials at the Federal Reserve believe that our economy is at “full employment.”

But as Michael Snyder noted this month, there are at least 10 reasons that show why the unemployment numbers are a massive lie:

But what they are telling us simply does not match the cold, hard reality on the streets.

And since the talking heads on television are proclaiming that we are nearly at “full employment”, that just makes millions upon millions of Americans that can’t seem to find work no matter how hard they try feel even worse than they already do.

If jobs are “easy to get”, then those that are chronically unemployment must have “something wrong” with them.  That is the message that we are being given.  If the mainstream media says that unemployment has gone way down, then anyone that is still unemployed must be really “lazy”, right?

When you are unemployed for an extended period of time, it can really suck the life right out of you.  It can be really tempting to believe that you are viewed as a failure by your family and friends.  And for the government to lie to us like this just makes things even harder.

If you are unemployed and can’t find a job right now, I want you to understand that you are caught in the midst of a long-term downward economic spiral which is going to get a lot worse.

When the government tells you that we are in a “recovery”, they are lying to you.
And as things get more difficult for average Americans, so too will it become tougher for people to pay their expenses, including loan repayments on cars, credit cards, mortgages and student loans.

The fact is, things are not going to get better for most people. They’re going to get worse.

As for the borrowed money held by college students and graduates – that bubble is now exploding. It’s a warning we published last year and we can now see it becoming reality:

College tuition cannot rise indefinitely. Eventually something will cause the great college bubble to pop.

Outstanding student loan debt is over $1.2 trillion. This is nearly 50% higher than outstanding credit card debt.

The longer the status quo is kept, the bigger the bubble is going to get… and thus the larger the crash will be.
In the coming years student loan payments will get so high that it’ll be unmanageable… even for the students that get the dream job that they were told their degree would award them.

Massive defaults will occur and colleges will soon be worse off. Prices will need to be readjusted to maintain the maximum income when attendance levels crash.

Professors will face pay cuts or layoffs, along with administration, maintenance, construction and anyone else working for or at a college or university.
The consequences will be felt nationwide as the college loan scam falls apart.

And it will be Americans who got duped by the promise of high paying dream jobs and financial stability who will pay the ultimate price.

You can read more from Mac Slavo at his site, where this article first appeared.

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