In less than 15 years, U.S. student debt has more than tripled as a share of household debt. It currently represents 10 percent of household debt.
CGTN’s Karina Huber has more.
29-year-old Missy Johnson is working on her PhD at Columbia University’s Teachers College in New York. She’s hoping to become a child psychologist.
She’d like to stay in New York but it’s not an option given the amount of her student debt- currently at $150,000.
When she graduates in two years, she expects to owe roughly $220,000 including interest. Her parents are shocked by the amount.
“So I think they feel daunted and overwhelmed about it and concerned about my ability to pay it off,” Missy Johnson said. “And save for retirement and be able to have a future.”
Missy is not alone.
Roughly 44 million Americans – one in six – have student debt with an average of $32,000 per person. Collectively, they owe $1.4 trillion.
Many of them – more than a million per year – end up defaulting. The U.S. government pays collection agencies almost a billion dollars annually to help them get back on track and recoup some of that money.
But new data suggests it may be wasteful spending.
American taxpayers are paying collection agencies $38 for every dollar collected, and almost half of those who default re-default within three years of returning to good standing.
Some say the problem is collection agencies get paid even if the borrower defaults again.
“I think part of it is the incentive structure. Part of it is the programs themselves can be complicated and servicers and debt collectors may not have all of the information themselves,” said Adam Minsky, an attorney specializing in student loans.
Minsky said many borrowers fall through the cracks. The Consumer Financial Protection Bureau calls it a broken system. The Trump administration has vowed to take a closer look at the program.
Missy is worried about the day her bill comes due. Every morning she logs on to Givling and answers a few trivia questions in exchange for a chance to have some of her debt paid off by the app. It’s her way to proactively get ahead of her debt. But she has no illusions about the future.
Paying off her debt as soon as possible is her goal but if she doesn’t find a good-paying job shortly after graduation she knows defaulting may become a reality.