Econintersect: Many (see Sources, end of article) have reported the ever increasing student debt burden building in the economy. Outstanding student loan debt is about $1 trillion and growing, larger than any other category of consumer debt except for mortgages. All other categories of consumer debt, including mortgages have been falling for five years except for auto loans which have been increasing recently but remain below 2005-2008 levels.
As shown in the caption graphic student loan debt grew by approximately 400-fold from 1990 to 2011.
While most categories of household debt have been declining or remaining level as a result of the “Great Unwind” (Econintersect term) following the Great Financial Crisis (GFC), student debt has been rising at the average compound rate greater than 14% a year. Over eight years student debt outstanding has risen almost four-fold.
Click on graph to view interactive version at the New York Fed.
The overall progress of the Great Unwind is documented in the following graph which includes the rising student loan debt.
Click on graph to view interactive version at the New York Fed.
Here is a summary of the student debt problem from the 5 Min. Forecast:
- In January and February alone, banks wrote off $3 billion in student debt, according to figures out yesterday from the credit reporting firm Equifax — a 36% increase from a year ago
- Of the 40 million student borrowers out there, 17% are more than 90 days in arrears, according to a New York Fed report last month
- The cost of earning a bachelor’s degree has grown 5.2% per year, every year for the last decade, says the government’s Consumer Financial Protection Bureau.
It is not just private colleges that are contributing to the problem of rising costs. The five-year growth in cost (5.2% a year) is 29%. As a result of drachonian tax revenue reductions during and after The Great Recession, public four-year college tuitions in 14 states have exceeded the average overall for the past five years.
The problem of delinquency has been building for some time. Two years ago survey results reported by GEI News found that there were repayment problems for more than 40% of student loans. At that time the percentage of 90+ day delinquencies was around 9%. It is now over 11%, as seen in the following graph in an article by James Quinn.
Sources:
- Special Section: Student Loan Debt (Federal Reserve Bank of New York,
- Underemployed and Overindebted (5 Min. Forecast, 27 March 2013)
