Thursday, March 8, 2012

New York Federal Reserve Bank Study on Student Loans

From the Chicago Tribune:

A new analysis from the Federal Reserve Bank of New York gives startling details on the rising levels of student loan debt in the U.S. The report finds that Americans had a total of about $870 billion in student loan debt in the third quarter of 2011.

The report, based on analysis of data on 241 million Americans from credit reporting agency Equifax, adds to a growing list of troubling indicators about the cost of higher education. Here are some startling figures that illustrate the growing specter of student debt:

It's bigger than plastic. Outstanding student loan balance has surpassed the nation's $693 billion credit card balance, according to the report. According to recent data, nearly 80 percent of Americans held credit cards as of 2008, compared to 15 percent of consumers who now hold student debt, according to the Fed report. That contrast illustrates just how small of a pool of Americans holds this large chunk of debt.

But with tougher repayment. According to one calculation, delinquency rates on student loan debt are nearly twice that of other household debt. The New York Fed report estimates that past-due student loan balances equal $85 billion, or around 10 percent of the total national student loan debt burden. More than 1 in 4 of the 37 million student loan borrowers represented in the Equifax data have past-due balances.

Growing debt, stagnant wages. Unlike many goods that people buy with their credit cards, an education doesn't depreciate in value, and can boost lifetime income by hundreds of thousands of dollars. Despite growing debt, some graduates aren't reaping those benefits. From the second to the third quarter of 2011 alone, outstanding student debt grew 2.1 percent. Data suggest that wages are not keeping up with that growing debt. In 2006, new graduates left school with an average of $19,646 in debt, according to the Project on Student Debt, an initiative of the Institute for College Access and Success. In 2010, that figure was up 29 percent to $25,250. Meanwhile, in 2010, median weekly earnings for college graduates 25 and older were at $1,144, up only 10 percent over 2006, according to the Labor Department.

It's not just a Generation Y problem. According to the New York Fed's report, 5.3 percent of the 37 million borrowers are age 60 and over, and another 11.8 percent are 50 to 59. This doesn't necessarily mean that boomers are going back to school (or still paying off their loans from the 1970s). Rather, it may be one sign that parents are increasingly taking out loans to pay for their kids' educations. According to a February report from the National Association of Consumer Bankruptcy Attorneys, 17 percent of parents whose children graduated in 2010 took out loans, up from 5.6 percent in 1992-93.,0,516758.story

Given that the New York Fed was compelled to do a study of the student loan boondoggle it is apparent that the policy makers are beginning to worry about this. As we all are well aware the student loan crisis is going to be a major fucking problem. This country is so levered up to its eyeballs in debt I fear the consequences will make Greece's problems seem like a walk in the park. Today we got the lovely headline that February 2012 had the highest deficit in US history. So much for the recovery.

From the Washington Times:

The federal government recorded its worst monthly deficit in history in February, according to a preliminary report Wednesday from the Congressional Budget Office that said the deficit in fiscal year 2012 is already more than half a trillion dollars.

The CBO’s figures show that despite repeated efforts to trim spending, the government has borrowed 42 cents of every dollar it spent during the first five months of this fiscal year. The nonpartisan agency projected the government will run a deficit of $229 billion in February, the highest monthly figure ever.

As I have stated from when I first started blogging 2 years ago, my outlook on the US economy is extremely dark. Since then, what has transpired has only solidified my view. How is this generation going to spend, invest and do all the other things that the generations before did with this huge debt burden? Guess what, many of us won't. Because our policy makers have decided to make student loans nondischargeable in bankruptcy, many will toil away to pay off this odious debt. So Uncle Scam makes his points on the interest while the principal was front loaded to faculty, book publishers, laptop producers and landlords (many student loan borrowers use the money to pay rent as well).

What an excellent way to run a country, by throwing the latest batch of earners into heavy debt. I pray that you all find jobs in this difficult time. I've been employed at a decent job now for 15 months but I worry as the field is far from stable. I'll call defense counsel on a case that I've been working on for some time and before you know it "Mr. Y is no longer with the firm." Fuck that creeps me out.

Being from Greece I have spoken to many people back home and they tell me the situation is terrible. Many of them feel that they have no hope and are searching abroad for opportunity. The reality is, almost none of these people are in debt. When I tell my cousins that I know many people that owe more than 200k in student loans with no jobs they don't believe me. It truly is a joke what we have going on in America, the freest country in the world. Not. Welcome your new overlords. America is going the way of feudalism much quicker than I ever expected. Even that punk bitch Romney told some college student "not to expect bankruptcy" options. To hell with you, Mitt. Tell your boy Trump that's filed bk three times that he has to have his salary clawed back to pay his creditors. Oh, wait. In this new fascist America different rules apply to different people.

At least awareness is growing about this student loan timebomb. After all, how do underwater home owners ever expect to dump their overpriced homes if we debt slaves can't ever qualify??? Obviously we won't be buying any homes any time soon so enjoy watching what little equity you have vanish the same way customer accounts vanished at MF Global after it's largely ignored implosion.



  1. Yes the US government's dependence on foreign debt is very troubling. As far as individual American families go, whether or not they succeed will have more to do with their own behavior towards finances, luck, and opportunity. Yes some will make and others will not, and the sad part about is that it’s always been that way.

  2. "The New York Fed report estimates that past-due student loan balances equal $85 billion, or around 10 percent of the total national student loan debt burden. More than 1 in 4 . . ."

    Nope. Re-read the report. They are counting as "delinquent" a bunch of categories which are not delinquencies.

    Borrowers who are 1-30 days past due. are Current, not delinq. Accounts where the default claim has been paid by the guarantor are defaulted, not delinq. They should neither be in the numerator nor the denom of a delinq. rate.

    While very few borrowers choose income-based repay, those loans are money-makers for the govt whether or not their balance happened to decline that year. Furthermore, counting them as delinq. when they are choosing a plan which is legit under the law seems incorrect.

    Borrowers who have filed for bankruptcy are not delinq.; in fact the lender can't bill them even if it wanted to, until the court process is resolved.

    Borrowers during the in-school and grace period statuses are not delinq. This is not a period of laziness or sloth. These are arguably your lowest-risk borrowers, your (near) future profit centers. They should not be in the denom., but they definitely should not be in the numer. either.

    It is debatable whether deferments and forbearances should be in the denom., but they definitely should not be in the numer. However, think about it, if you take def/forbs out of the denom., then what is left there? Just delinq. and current repayment? Minus the repayment plans the researches do not currently like? They need to stick with standard definitions to have any credibility.

    Finally, they are mixing private and federal student loans, because their 5% Equifax sample can't distinguish. Federal student loans have a lower delinquency rate than most other types of consumer credit products.

  3. Its called personal responsibility. Now suck it up. You signed a contract when you obtained your student loans. You have the audacity to pretend that you dont have knowledge of contractual law after studying it. 2 wrongs don't make a right. No bail out for you. Work and earn your own like everyone else. How moronic to complain about bailouts and then demand your own. What a dolt and lazzy P.O.S. you are.

    1. Bankruptcy serves as a clearing mechanism for malinvestment and helps the economy clear out such debts which only hinder it.

      "You signed a contract when you obtained your student loans. You have the audacity to pretend that you dont have knowledge of contractual law after studying it"

      Millions of middle aged Americans signed mortgage contracts during the height of the bubble. Obviously, everyone now knows that severe malinvestment took place in higher end housing. All the defaults serve as a clearing mechanism as millions of households are no longer burdened by non-productive debt.

      "Work and earn your own like everyone else"

      "Everyone" else is not drowning in six figure student loan debt which was incurred on a fraudulent basis.

      "How moronic to complain about bailouts and then demand your own"

      YOU are the fucking moron. This blog has never demanded a fucking bailout, but rather, the return of BANKRUPTCY protection to student loans debt.

      "What a dolt and lazzy P.O.S. you are"

      LOL. I probably work harder and earn more money than you ever will.

  4. much money do you make per year, BEFORE taxes (Stepbrothers reference)?

    Do you know what a hypocrite is? It's someone who says one thing and does another. If you make a lot of money as a lawyer, I don't see how you're qualified to bitch and moan about the economy, the legal field, etc. I probably make MUCH less money than you (as a recent grad from law school), (lucky to get temp doc review jobs) however I think I worked just as hard as you, if not harder. Never equate income/wealth with effort.

    It sounds like we agree in one respect: I am a Ron Paul supporter-I bet you are too?

    Yes I refer to student loans as toxic waste or toxic sludge, because they are the only form of debt that is non-dischargeable in bankruptcy. The US govt is essentially broken, because it no longer works for the people, but rather the banksters and corporations.

    Yet the people are still too blind to see it. Hence no win for Ron Paul?

    1. Oh don't mind the money comment. I'm just running my mouth talking shit. He accused me of being lazy and a piece of shit so I let him have it. Probably some broke ass 1L anyway. Besides I don't make much anyway LOL, should do around 80k this year if all goes well.

      I agree that income does not equal effort. However, risk AND effort is absolutely necessary to become wealthy in this life. If you fuck up you keep trying until you can't try no more. If you win then it's a game charger. If not, at some point you move on and hope to make a decent living as a wager. Less stress but less money. Me, I hope to one day learn enough and grow my balls to the point where I will be able to do something on my own. Time will tell.

      Regarding Paul, the fact that these proles are voting for Santorum and Romney proves two things: voter fraud and/or Americans are still too blind to see the truth. The truth is painful and many prefer to bury their heads and watch junk TV. I just flipped thru some shows and oh my I couldn't watch ANYTHING of value. The internet is the truth zone.

      I love Ron Paul and hope he runs third party just for fun. I wouldn't be surprised that he pulls 25% of the votes as many dems and independents love him. No way he can win tho with the bankster corporate controlled media ignoring and demonizing him as bad as they do.

      No revolution any time soon kid. Just prepare and hope for the best.

    2. OK we actually agree on many things, including Ron Paul. Rampant voter fraud and lying hack media.

      I am sure you will get a kick out of 2 things that may not (or maybe did) come to your attention.
      1) alex jones
      2) greg smith's goldman op ed. IMO it is a symptom of the larger disintegration of the moral fabric of society, including the legal field, large (and small) law firms, etc.

      Morality is dying? Or has it always been in hibernation? But I digress

  5. There are two sources for student loans — the federal government and private lenders. In order to obtain most Federal student loans
    , you will first need to file the Free Application for Federal Student Aid (FAFSA). In most

  6. Its fine to get or apply for a student loan once in a while, but one must always remember about the consequences. Limitations are always there to guide people when trying to make ends meet. I myself have been in this kind of situation but sometimes, it will pull you down when you don’t know how it will work.

  7. It seems like student loaning is getting way too popular nowadays, I wonder how will that popularity be maintained for the upcoming years. Student loans are proven to be a good and reliable deal.

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