Here’s a trick question: What do we owe more money on — credit cards, auto loans or student debt?
Ping! Time’s up. If you answered student debt, congratulations. You’re up to date on what some economists are calling the next big financial crisis. Or maybe you just happen to be one of the many who are saddled with tens of thousands of dollars in student loans acquired while earning a college degree, the credential long favored by those aspiring to a better life.
A report released by the Federal Reserve Bank of New York last month found that total student debt — a staggering $870 billion — was more than Americans owed on their credit cards. A more recent report, issued by the Consumer Financial Protection Bureau, put that figure higher: Federal and private student loan debt have shot past the trillion-dollar mark.
All of us know at least one person who’s paying back a princely sum. A few ready examples: A couple who pay more for student debt than their mortgage. A young man who chose a private-sector job instead of following his dream into public service because of his indebtedness. A mother finally paying off her loans just as her own kids are applying to college.
“A student loan can be … like a ball and chain that you can drag to the grave,” William E. Brewer, president of the National Association on Consumer Bankruptcy Attorneys, told the Washington Post. “You can unhook it when they lay you in the coffin.”
Pundits have called our children Generation Debt, but it’s not just young people who are weighed down with student loans. The Federal Reserve report shows that the 60-and-older set still owes about $36 billion, and more than 10 percent of those loans are delinquent. The Post reported that it’s not rare for Social Security checks to be garnished for student loans.
For someone hurtling toward retirement, that’s a scary scenario. What will it be — your Coumadin prescription or your student loan payment?
Some seniors acquired new debt in order to update job skills and make themselves more competitive. Others co-signed loans for their children or grandchildren. Whatever the reason, ballooning student debt has forced us to take a closer look at how people are penalized for “doing exactly what they were told would be the key to a better life,” as the Consumer Financial bureau ombudsman put it.
Once upon a time, college — even just a year or two — was the stepping stone to overcoming humble beginnings. But these past few years have turned that thinking on its head. Rising tuition, a dearth of jobs and the length and amount of student loans have watered down the advantages. Those who would benefit most from making the leap into higher education are faced with a demoralizing reality: a lifetime of debt.
For many in the middle class, the possibility of a college degree is slipping away. Soon, if not already, the great equalizer that is higher education will become one more factor dividing the haves from the have-nots.