Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Nov 11, 2011

Advertiser Disclosure

Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.

Imagine our nation’s most recently graduated student. This proud, job-seeking, ready-to-take-on-anything individual is filled with hope, excitement and vigor. He imagines the future and sees nothing but the sky—for that’s the only limit that could possibly contain him.

 

So he begins his quest and tries to enter the job market. After creating a resume, and proofreading it over and over, he submits applications to all those wonderful employers he could picture himself working for. Each morning, the student curiously tilts his head as he finds his email inbox empty and the voicemail alert on his cell phone absent. As more time passes, his future outlook begins to slowly dwindle as discouragement fills its place due to the lack of responses he’s received from employers.

 

Then the realization sets in: I owe tens of thousands of dollars for this degree—and I’m unemployed.

 

This is an all-too-real trend that’s plaguing our nation’s freshly educated graduates.

 

It’s not uncommon for students to finish their four years of college and find they owe over $20,000 on their student loans—and that’s on the conservative side.

 

In fact, the National Student Loan Program recently stated the average undergraduate student carries $23,000 of debt today.

 

The U.S. Department of Education released statistics on the 2009 student loan cohort (those who obtained student loans between Oct. 1, 2008, and Sept. 30 2009) indicating that the default rate for those borrowers is 8.8 percent. That’s up from the 7 percent default rate the 2008 student loan cohort wields.

 

As explained by Arne Duncan, the U.S. Secretary of Education, “These hard economic times have made it even more difficult for student borrowers to repay their loans.”

 

That difficulty to repay is particularly relevant when considering just how much money is tied up in student loans.

 

According to the Federal Reserve Bank of New York, students took out a record-breaking $100 billion last year, and, for the first time ever, the total student loan debt will exceed $1 trillion by the end of this year, reports USA Today.

 

The amount of money tied up as debt in a portion of the population that is having difficulty finding a paycheck should ring a particularly ominous sound in our ears.

 

After all, the housing market sang the same tune, and the bubble was caused by the same thing: illiquidity. For many, the inability to turn real estate into money became a financial burden, wherein owners owed more for their property than their property was worth.

 

If students are taking out such extraordinary sums and are unable to find jobs (as evidenced by the rising default rate), then are degrees becoming financial burdens? If education begins to cost more than it’s financially worth, what will happen to the $1 trillion floating around in student loans today?

 

With the constant barrage of new measures aimed to counter students’ debt and our overall failing economy, let’s hope this inflating bubble is reduced to more healthy levels before our financial market suffers yet another critical implosion.