Student Loan Debt Damaging Economy

: Chris Lee Law Firm

  Filed under: Student Loans

economyIt isn’t just the graduates that are suffering at the hands of a crippling student loan debt industry. New evidence indicates that the toll it is taking is quickly spreading beyond a personal crisis and one of, what could be, global proportions.

Lending and Borrowing

The problem with the student loan debt industry isn’t just about the near trillion dollars that is currently owed, but that the rate of default rises each month with  more people succumbing to insolvency over repaying their loan. With that rise in default comes unpaid lenders, who turn to increasing rates to cover their losses. As the cycle continues in a negative feedback loop the graduates become strained, the lenders become strained, the chance at loans for future borrowers becomes strained and nothing positive is resulting from borrowing in the future.

Whether a  borrower is stuck in debt default or actually lucky enough to be sustaining their payments each month, statistics show that there has been a significant reduction in new applications for home mortgages and car loans. Essentially, more people are finding they cannot afford loans for cars and homes. If this trend continues, we could see increased rates for both of these types of loans so that lenders can attempt to profit.

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