Dec 11 (Reuters) – U.S. student debt levels are surging but
along with degrees and skills the loans are producing perverse
incentives and unforeseen economic consequences.
Consumers upped their debt by a seasonally adjusted $14.2
billion in October, driven in substantial part by strong growth
in student loans, a market dominated by the government.
U.S. student debt has grown at a nearly 14 percent clip
annually since 2005, hitting $904 billion in the first quarter
of 2012, partly cushioning the impact on the economy of an
overall fall in outstanding debt as people sought to use a
period of slack growth to retool.
A tough job market, however, has led to growing rates of
delinquency and default, with 10.6 percent of loans more than 30
days past due, a figure that masks the difficulty students are
having because it does not include the many which are in
deferment or forbearance.
To be sure, student loans are a form of economic stimulus,
driving jobs and consumption, but there are real questions over
how effectively the money is being used and how the accumulation
of debt will affect borrowers in the future.