US student debt impact likened to subprime crisis

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Source: Financial Times

US university students and graduates are facing a double whammy of ballooning debt loads and high unemployment, raising worries that a potential delinquency crisis could bleed into the wider economy.

Student debt has increased nearly sevenfold from $80bn in 1999 to $550bn at the end of June 2011, according to the Federal Reserve Bank of New York. Other estimates from the Department of Education put outstanding student loans as high as $805bn.

But the unemployment rate for 20- to 24-year-olds is nearly 15 per cent – higher than the overall 9.1 per cent rate – compromising the ability of graduates to pay off their growing debts.

Student loan delinquencies have risen from 6.5 per cent in 2003 to 11.2 per cent in June 2011, nearly as high as the 12.2 per cent rate on credit cards.

Read more: http://www.ft.com/cms/s/0/6ae7dfc4-ef78-11e0-941e-00144feab49a.html

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