Where Student Loan Debt is Heading By 2021

Student loan debt is the largest financial crisis facing young Americans today, and has reached the highest its ever been in all of history. It’s causes can be traced back to several sources, the foremost being 1) increasing tuition rates with little to no increase in wages, and 2) predatory practices by private and federal loan providers who create interest rates that regenerate the debt as faster than it can be paid off, and then driving people into default who can’t keep up.  Of course, there are other causes for the historical enormity of the debt, i.e: lack of state funding, lack of government intervention or regulation of tuition rates; safety nets; affordability to remove debt in bankruptcy court or awareness.

So where is student debt headed if it continues on the path it is on? The Harvard Business Review published an article “What Will it Take to Solve the Student Debt Crisis” where writer Daniel Johnson said: 

“But student debt is only one part of a much larger crisis. This debt, regrettably, is on a trajectory to grow much larger in the future. Economists project an accumulated student loan debt of $2 trillion by 2021, and, at a growth rate of 7% a year, as much as $3 trillion or more by the end of the next decade.”

As the current student loan debt is estimated at $1.4trillion, these numbers are ever present on the following class of 2020 graduates from highschool to law school.  In a generation of debt owners, there will be less spending on luxury items, as demonstrated by the Barney’s bankruptcy filing late this summer, less spending on vacations, less large purchases such as a house, and other purchases that stimulate the economy.   These factors contribute to the speculation towards a recession in 2020, heightened by the trade war between the US and China.

It is unsure how large the student debt will need to grow before students can see any fall in the constant, seemingly unstoppable upwards path of student debt in America.

Source: https://hbr.org/2019/09/what-will-it-take-to-solve-the-student-loan-crisis

Image: Jessie Jacobson via Flickr