Guest Opinion: Student Debt Poised to Be Next Debacle

Student loans are poised to become the next big consumer debt debacle. Total outstanding student loan debt is expected to top $1 trillion this year, more than double the amount owed just five years ago. That would push it well above the amount of credit card debt outstanding, which totaled less than $800 billion last November and is down nearly 17% since peaking in 2008, according to the Federal Reserve.

Partly as a result, the default rate on student loans is now far higher than on credit cards, too. According to the U.S. Department of Education, nearly 9% of student loan dollars were in default in fiscal 2009, up from 7% in 2008, the latest figures available. The default rate at for-profit colleges was even higher, at 15%. By comparison, the charge-off rate on credit card loans was 5.8% in the third quarter of 2011, down from more than 10% in 2009, according to the Fed.