A Revealing Update on Student Loan Debt

Despite a rising stock market and relatively healthy economy, most people who've borrowed to get a higher education still have a long way to go to pay off their debt.

This is from CNBC (Jan. 16):

The rapid increase of student loan debt has slowed over the past few years, but individual borrower balances aren't going down mostly because hardly anybody is paying down their loans.

Total indebtedness over the past year or so has stopped its meteoric rise, according to a study that Moody's Investors Service released Thursday. Nevertheless, the study showed a number of factors are constraining borrowers from lightening their loads. Outstanding loans total more than $1.6 trillion, more than doubling over the last decade and tripling since 2006.

Since the explosion of student debt following the Great Recession, annual repayment rates, or the amount of existing balances lowered, have been just 3%, Moody's said. Just 51% of borrowers who took out loans from 2010-12 have made any progress at all in paying down their debt.

"While in the past, higher enrollment and rising tuition were the main drivers of growing student loan balances, more recently, slow repayments have become the primary driver," Jody Shenn, senior analyst at Moody's, and others said in the report. "Over the next few years, the combination of slow repayments and elevated, if no longer growing, levels of new borrowing will likely fuel further increases in outstanding debt."

The fact that many borrowers have not put a dent in their student debt is not surprising.

You see, Robert Prechter's Conquer the Crash (2018 edition) predicted as much:

Although [student debt] is private debt held by individuals, it is promoted and backed by the government. These are the same conditions that jacked up real estate debts and prices before the last bust.

If borrowing continues forever, then deflation won't happen. Is student-loan borrowing going to continue its upward trajectory? Not likely. Many students who owe money cannot or will not pay, and the failure rate is rising. Deflation and depression will wipe out most of these debts. [emphasis added]

Elliott Wave International's analysts view the huge mountain of student debt as a portent of a massive deflation.

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