Student loans could lead the US to a new financial crisis

American students have never been so indebted: credits to finance higher education are the second largest debt mountain after mortgages. Observers see a strong parallel with 2008. The American Toni Vincent completed her master's degree in public health three years ago. To do this, he had to incur debts of hundreds of thousands of dollars before receiving his first salary. She took out a student loan of $ 100,000, including $ 15,000 for a bachelor's degree at a public university and $ 85,000 for a master's degree at the prestigious George Washington University.

Currently 32 years old, she works as a program director in a non-profit organization that coordinates projects in the public health sector. His salary is not enough to quickly amortize the loans. After three years in her first job and still at the beginning of her career, she is still in debt with a debt of $ 80,000.

Vincent is one of 44 million Americans who pay tuition. In all, they owe the state $ 1.5 trillion, a record amount, surpbaded by that represented by mortgages. In the United States, nearly 7% of the total debt is public student loans. According to a study conducted in June 2018 by the Fed, the US central bank, 42% of students had to use their credit. complete their university studies, on average between $ 20,000 and $ 25,000.

Jon Fansmith is director of the American Council on Education (ACE), a university badociation that represents 1,800 institutions across the country. the country. From their point of view, there are more citizens studying than before, so more credits and more debt, "which is not necessarily a bad trend".

In fact, in the third quarter of 2018, 20 million students were enrolled in American universities, nearly 5 million more than during the same period in 2000, a degree from the higher education has never been so important.

A 2013 study by Georgetown University shows that by 2020, about 65% of all vacant positions will require at least a bachelor's degree. It was therefore unthinkable for Vincent not to go to university, which constitutes his "investment in the future".

However, this investment is gaining momentum because over time, studies cost a lot more. Since 1989, costs have quadrupled, depending on the type of school and the length of the course. Entering a public institution of higher education for four years costs about $ 20,000, a private institution costs $ 50,000.

On average, each graduate must pay $ 351 per month, often for decades. About 10% of them are no longer able to pay after two years and they declare the default.

In 90% of cases, the creditor is the state and the taxpayer ends up paying the damages. The trend is worrisome: according to the Brookings Institute, more and more students will not be able to repay their loans and, in 2023, the number of defaulters could reach 40%.

For years the bankruptcy of the investment bank has accompanied the media. Lehman Brothers and the 2000 financial crisis that followed. CNBC TV talks about the bubble, Fox News and MarketWatch are already seeing a crisis. The fear is that student loans now play the role of mortgages for Americans whose credit score is bad.

Before the last financial crisis of 2008, mortgages for poor quality residential units were resold as high-end financial products. risk. Banks had to be saved with taxpayer money, which could happen again. There are real parallels.

The mountain of debt of American students can also have an impact on the economy, as indebted youth buy fewer cars, homes and, in general, consume less, warned the president of the Fed, Jerome Powell. addressing the Congress in March 2018. He sees a macroeconomic risk "likely to slow down the economy".

Studies already show that the inability to repay debts has negative effects on debtors as it puts their credit rating at risk. For this reason, the Obama administration intended to help some of them as part of the program of rehabilitation of student loans, canceling part of the debt of those who entered the public service after graduation.

However, the Ministry of Education has just revealed that

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