$1.2 Trillion In US Student Loan - 

A Ticking Time Bomb

by Constantin Gurdgiev • June 12, 2016

U.S. student loans are, in very simple term, a ticking time bomb. The indebted generation is in the younger demographic with limited income prospects and the job markets that are longer-term characterised by greater income volatility and lower income trends. This means that repayment of these loans exerts greater pressure on household savings and investments exactly at the period of the household life-cycle when American workers benefit the greatest from the compounding effects of savings and investments on life-time income. In other words, the opportunity cost of this debt is the greatest.

More college grads move back home with mom and dad

Although graduates from the class of 2016 enjoy the best job market in years, the number of young adults postponing romantic partnerships and marriage has contributed to the growing share of those who are still living at home. The median marrying age has risen steadily for decades. It's now 27 for women and 29 for men, up from 20 for women and 23 for men in 1960, according to Pew. 

Then there are the hefty student loan bills from school, which are at an all-time high, putting a severe strain on most recent graduate's financial circumstances. Seven in 10 seniors graduate with debt, owing about $29,000 per borrower, according to the most recent data from the Institute for College Access & Success. 

From a financial perspective, moving back home can provide millennials with an opportunity to start paying back loans and build up an emergency fund with a goal of getting to independence.

DYI Comments:  Basic economics 101 will tell you if you have a third party payer(student loans) over time the cost of education will rise to the level of available loans. To combat that rise in college costs larger loans were allocated to the student only to have the cost of education increase once again to the level of the loans.  This vicious circle has created a 1.2 trillion college debt bubble that is bursting with massive delinquent payments creating a generation of debt slaves.

To lower the costs of college significantly is simple, do away with student loans.  Within five years cost will drop to the level that a student can reasonably afford.  Oh the universities and colleges will scream that it will be the end of the world or to put directly the end of their subsidies.  After five years costs will drop back to where a student can work a part time job and graduate debt free.  Just as it was before the student loan program began in 1965 with the Higher Education Act during Lyndon Johnson's great society program.  Another socialist's dream only to once again turn into a nightmare.

DYI