The struggle for today’s college graduates to pay back student loans is much more severe than previously thought, according to a recent report released by the Federal Reserve Bank of St. Louis.
The new findings not only speak to a weakening economy but it’s also the type of statistic that is causing some to question the value of a college degree when the labor market is in such poor shape.
Before researchers at the St. Louis Federal Reserve took a second look at the student loan default rates, it was believed that delinquency rates for loans 30 days or longer past their due date rose from 11 percent to 17 percent in recent years.
That number was enough to justify concerns about the current landscape for student borrowers, but the latest analysis revealed that the 17 percent estimate is more than 10 percentage points too low.
“Once you narrow it down to those actually required to make regular payments, the number of 30-day delinquent borrowers rises to 31 percent,” BuzzFeed reports of the findings.
That percentage adjusts the previous findings to account for students who are not obligated to make payments on their loans due to deferment plans or grace periods.
That number soars well beyond the current rates for delinquency on credit cards and mortgages, which stand at 2 percent and 6.8 percent respectively.
Despite the higher percentage of delinquent student loans, the researchers insist that the new statistics are not an affirmative sign that student loan debt is a growing problem.
In fact, they even argue that the exact opposite may be true.
“The share of student loans borrowers whose loans are not in repayment has decreased from 53 percent to 45 percent over the past 10 years,” the researchers said. “This decrease confirms our earlier indication that the trend in delinquency is not as problematic as it seems.”
This, however, still paints a troubling picture of a reality where students are being forced to result to deferments or to try to win forbearance in order to stay financially afloat. And in addition, they are doing great damage to their credit rating, which will make it much more expensive to buy a car or house when they do finally get a job. And speaking of job, many employers are now checking credit reports as part of the hiring process, meaning the implications of the loan crisis are even more serious in the short term and the long term.
For many college graduates, this begs the question: How valuable is their college degree if they can’t even afford to pay back the loans they took out to get it?