It's been a while since we took a look at the household debt mountain, which grew at an alarming rate in the pre-bubble years after 2003. The Quarterly Report on Household Debt and Credit report for the 1st quarter came out on May 31. We know the economy sucks, so how are we doing on household debt front?
NEW YORK – In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York today announced that student loan debt reported on consumer credit reports reached $904 billion in the first quarter of 2012, a $30 billion increase from the previous quarter.
In addition, consumer deleveraging continued to advance as overall indebtedness declined to $11.44 trillion, about $100 billion (0.9 percent) less than in the fourth quarter of 2011. Since the peak in household debt in the third quarter of 2008, student loan debt has increased by $293 billion, while other forms of debt fell a combined $1.53 trillion.
[My note: All other forms of debt fell mostly due to default, especially on mortgages.]
The New York Fed also released historical student loans figures, by quarter, dating back to the first quarter of 2003 as part of this quarter’s report. These data show that student loan debt has substantially increased since 2003, growing $663 billion. Outstanding student loan debt surpassed credit card debt as the second highest form of consumer debt in the second quarter of 2010.
“Student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances,” said Donghoon Lee, senior economist at the New York Fed. “It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.”
The household debt mountain from the New York Fed, via Calculated Risk
. Only outstanding student debt increased. All the other categories decreased slightly.
The obvious "highlight" of this report was the $30 billion (30,000,000,000) increase in student loan debt during the first quarter, which took the grand total up to $904 billion (904,000,000,000). The happiest statistic indicates that student loan debt has grown by $663 billion (663,000,000,000) since 2003.
This dramatic increase in student indebtedness has been due no doubt to the concomitant increase in the value and quality of a higher education
And there was more good news about student loans. This text and graph are from the Washington Post's Why is student debt different from other kinds of debt?
When it comes to consumer debt, Americans are slowly but surely starting to dig themselves out of the hole of the recent downturn. Severely delinquent mortgages, credit card bills, and car loans have all been in decline over the last two years, according to the New York Federal Reserve.
But Americans have had significantly more trouble paying back one particular kind of loan. “Student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances,” Donghoon Lee, senior economist at the New York Fed, said in a statement. “It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.”
From the New York Fed report. Only the delinquency rate for student debt increased.
That's sounds bad, doesn't it? But wait, there's more!
What’s more, the delinquency rate alone doesn’t capture the full picture. The rate above doesn’t include, for instance, the student loans that have entered forbearance, which gives borrowers a temporary reprieve from making payments. Sallie Mae said earlier this year that 4 percent of all its private student loans were in forbearance.
Why are Americans having more trouble paying off student loans, as compared to other kinds of debt?
Good question!
It’s partly because of the types of consumers who tend to have high student debt. They’re younger than those who tend to take out house or car loans, at a time when half of all recent college grads can’t find full-time work. The pool of struggling borrowers also includes college dropouts, who are four times more likely to default on their loans than graduates, having accumulated debt but no degree to improve their employment prospects.
I don't know about you, but I'm grateful and proud to live in country which consumes its young people. And in so far as 23% of American teens either have Type 2 Diabetes or are pre-diabetic, meaning that blood tests reveal elevated levels of glucose, paying for college is likely to be the least of their problems as they move into their college years.
That's our household debt mountain and student debt slavery updates. Good news all around!
Bonus Video — The Student Loan Debt Crisis (October, 2011)
I too am proud to live in a country that consumes its young. This will only make them stronger once they dig themselves out of debt, like we all did before them. Didn't Mitt Romney start his career life with tons of student debt? He worked hard, and look what he turned into.
We can all be successful like him if we all work just as hard, right?
The old adage, "you gotta spend money to make money," is still true today, right? Throw all caution to the wind. Get in a mountain of student loan debt, and then work yourself out. Prove you're a "man" in the process.
It's the Amurican way.
Never forget: We all have to pay our dues before we can turn into rich, white males. That's just the way it is....
Posted by: John Andersen | 06/04/2012 at 10:33 AM