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Americans are borrowing more to finance their educations and working for decades to pay off their bills.
Americans owe a combined $870 billion in student loans – more than they owe for their credit cards and cars. And they’re carrying that debt long after they walk the stage.
In fact, only a few Americans manage to pay off their student loans while they’re still in their 20s, a new report from the Federal Reserve Bank of New York shows.
The $870 billion Americans owe for their educations far surpasses the $730 billion they owe on auto loans and the $693 billion they owe on credit cards. But as U.S. News & World Report noted “Unlike many goods that people buy with their credit cards, an education doesn't depreciate in value, and can in fact boost lifetime income by hundreds of thousands of dollars.”
Still, the cocktail of rising tuition, stagnant incomes and a tough job market is making it harder for Americans to pay off the larger-than-ever education debts they’re racking up.
Even U.S. Federal Reserve Chairman Ben Bernanke’s family is not immune. His son likely will graduate from medical school with about $400,000 in student loan debt, Bernanke said during a recent congressional hearing.
In 2010, the average amount of student loans new graduates held stood at $25,250, according to the Project on Student Debt. The figure was up nearly 30% from 2006. Meanwhile weekly wages for workers under 25 only rose by less than 10 percent over that period, according to the US Labor Department.
The New York Fed report showed people are continuing to pay off their student loans well into their 30s and 40s, perhaps even longer. It noted that 5.3 percent of borrowers are 60 and over, a figure that could represent parents taking out loans to pay for their children’s educations.
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The New York Fed data showed one in four student loan borrowers had a past-due balance in 2011. It said nearly half of all student loan debtors were between the ages of 30 and 50 and that 3.1 percent of borrowers held more than $100,000 in loans.
"As student loan debt continues to increase, those calling the student loan situation the next financial bubble seem to be less and less outside the mainstream," Time said.
Fortune recently referred to student loans as the next crisis to avoid.
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