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.

http://www.chicagotribune.com/classified/realestate/foreclosure/sc-cons-0308-money-consumer-watch-20120308,0,516758.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.

http://www.washingtontimes.com/news/2012/mar/8/govt-sets-record-deficit-february/

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.

Peace