On July 1st the interest rate on student loans rises from 3.4 percent to 6.8 percent of this year.
One year ago, the trillion dollar mark was crossed for the amount owed and required to be paid back for a student’s education..
3.4 to a 6.8 is a doubling… Just on a gross scale, off a Trillion dollars, the interest per year is jumping from $34 billion to $68 billion. On a $16 trillion GDP, that is nothing. But when you look at other figures, that jump has shocking consequences for the world-wide banking system.
The post graduate boom is usually what drives our economy. New cars, New electronics, New houses. Dining out. Spontaneous purchases. A study by the New York Federal Reserve shows that graduates are living austerely to pay of their gigantic debt, most of which are more costly than the mortgages owned by middle America. Asking someone to buy a house while paying off their educational loan, is equivalent to asking then to buy a second house while still paying off their first, How rich does one have to be in order to do that? What amount of yearly income is required to do that? +$125,000? Does this mean there will be no net new buyers of houses for 20 years? Anyways, after July 1st, there will be $34 billion less with which to purchase houses.
The Department of Education predicts a default rate of 13.4%… Off a trillion that means $130.4 billion dollars will be the amount defaulted. $130.4 billion.
So adding the two together, the upcoming shock on our economy will now cost $198 billion. Poof, right out the door, $198 billion. Gone from our economy.
Tran Union a credit reporting agency says the data in it’s files show that almost half, or 43.5% of student debt is in deferment. In dollars off that trillion total, that would amount to $435 billion dollars of debt not being paid in a timely fashion.
Particular concern must be paid here, because more than half of college graduates under the age of 25 are either unemployed or underemployed — the highest rate in 11 years, according to an analysis of government data.
Putting the two together, we have half of those required to pay $435 billion defaulted, who are either under or unemployed.
As we saw with mortgages, when people can’t pay, there is no notice, They just walk away.
A nation depends upon its newest generation to lead them forward with energy and enthusiasm, long after the previous ones are tired and ready for rest. This generation is coming out on the playing field, weighed down like knights of old, in ancient armor…. The upcoming football game does not look promising… Their best 100 yard dash is just under 10 minutes.