U.S. financial institutions fear the possible negative effect of the delay in payment for $1.6 trillion worth of student debts.
Student loans amounting a tremendous value
For the past years, the number of student loan grantees has gradually decreased, but the total amount of payable debts is not moving either.
Over the last decade, the total amount of student loan payables have doubled, amounting to $1.6 trillion.
According to data, around 44 million Americans contribute to the massive student debt, and they share the common excuse of having difficulty in allocating monthly budget to pay off their student loans.
Based on a study by Moody’s Investors Services, only 51% of the borrowers from 2010-2012 made efforts to pay off existing student loans.
While in the past, high enrollment rate and increased tuition fees have contributed to the rise in student loan balances, now, it’s the slow repayment that makes things worse.
Financial institutions fear that if the slow repayment and elevated level of borrowing continue, then the amount of student debt will blow out of proportion.
Politics regarding student loans concerns financial institutions
Many borrowers are taking advantage of repayment plans that let them pay their student loans on a long term basis.
But the upcoming presidential elections in the U.S. is stirring up concern on existing student loans. In fact, presidential candidates Senator Elizabeth Warren and Senator Bernie Sanders are putting efforts into finding a way to reduce or eliminate student debts.
Moody disagrees though to the proposal of discarding existing student debts.
The amount of student debt we have is surreal. Eliminating it in a snap without putting in actual funds to consolidate with that much loss can trigger negative effects for some financial institutions.
Though the gesture is good, whoever seats in the presidency come next year should also consider the domino effect of such action on the financial situation of the country.
A proposed change in regulation on the student loan forgiveness bill has just been denied by the house of representatives at a vote of 231-180.
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