US student debt hits $1.7 trillion amid rising defaults

US student loans: $1.7 trillion in debt and rising defaults

The scale of US student debt and growing non-payment

One figure is more unsettling than any political slogan: $1.7 trillion in accumulated student loans in the United States, according to widely cited data. This is not an abstract number. Behind it are graduates burdened by payments during their lowest-earning years, just as they enter the job market, alongside a rise in defaults that experts warned could impact banks. The debate over whether the fault lies with borrowers or the system has become a stalemate where few shift positions.

What peine to educational debt in the US

The starting point is an uncomfortable paradox. The US unemployment rate stands at 4.2%, effectively full employment, yet many graduates cannot afford what they signed up for. A common argument suggests that if there is work, one should work, and if there is debt, one should pay. The counterargument highlights structural issues rather than lack of will: educational credit has become expensive, access to higher education acts as a toll, and early career years offer the least financial resilience.

Some argue that the rigorous US system is preferable to Spain’s model, where taxpayers fund the education of those who later emigrate and generate wealth elsewhere. Opponents contend that aggressive collection practices turn youthful mistakes into lifelong financial sentences.

The business of degrees and dead-end majors

One line of analysis points to a degree bubble. There is an oversupply of bachelor's programs, a shortage of viable career paths, and a labor market unable to absorb university output. Critics target degrees with low employability, while defending fields like medicine, computer science, engineering, law, and business as meeting real demand. Proponents of this view suggest those outside these sectors should pursue other work.

A reasonable objection arises: who decides which degree is useless? Similar questions were asked about fields that now support entire industries. Another often overlooked detail: the profit isn't just in the degree itself, but in thesis preparation services, final year projects, and online academies generating revenue comparable to executive salaries at major companies, such as those on Spain's IBEX 35 index.

Who pays for education and who reaps the rewards

Spain’s model enters the comparison via cost dynamics. Public universities are cheap for students because they cover only a fraction of actual course costs, with taxpayers footing the rest. Private institutions, once accessible to the middle class, have become unaffordable due to tuition and housing expenses, especially when relocating to cities like Madrid, San Sebastián, or Bilbao.

This creates an asymmetry: public university students benefit from collective effort, while those who move abroad for higher wages take that return with them. Calculating the total cost of studying away from home versus future earnings reveals disparities that surprise first-time analysts.

Defaults threatening the financial system

Warnings about systemic risk are not new. Rising student loan defaults have previously been flagged as threats to banking stability, and the $1.7 trillion figure means any deterioration transcends individual borrowers. Debates over state guarantees for loans up to €1 million for elite careers add another layer: the risk extends beyond students to society at large.

What happens when borrowers cannot pay? In the US, wage garnishment is real and severe. In Spain, debt burdens are diluted among taxpayers while graduates can leave the country for better pay. Two models, two ways of distributing costs, neither resolving the fundamental question.

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The discussion on educational debt doesn’t end with a headline. It ends, if at all, with another question: if a degree no longer guarantees employment, who should bear the cost of trying?