Records are being set for student debt.
The Federal Reserve of New York reported that student loan debt has topped $1 trillion. The 12 percent delinquency rate is higher than the delinquency rate for credit cards and mortgage payments. The average student who took out loans last year will graduate with $26,600 worth of loan debt, which is 5 percent higher than the class just one year earlier.
Something has gone wrong when student debt continues to rise while the average earnings for people with a bachelor's degree has fallen 1.6 percent annually from 2000 to 2010. Another report found that 53 percent of recent college graduates are either unemployed or underemployed. That is the highest number in 11 years.
Increasingly the debt is falling on the parents, not just students. The federal Parent Plus loan program allows parents to borrow from the federal government for their children's college education when grants, scholarships and federal student loans aren't enough. Private student loans can also saddle generations with debt when parents co-sign on the loans taken out by their children.
The Pay-As-You-Earn Repayment Plant allows students to cap their monthly payments to 10 percent of their discretionary income. It doesn't phase in until 2014 and only applies to public loans. Another proposed plan would have student loan debt automatically deducted from the borrower's paycheck based on income.
The rising student loan debt is a problem for the economy as career professionals have to spend years paying off debt instead of pumping money into the economy. This is an issue that is going to escalate.