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And So It's Official: Pop Goes The Student Loan Bubble, As Just Confirmed By The Fed
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And So It's Official: Pop Goes The Student Loan Bubble, As Just Confirmed By The Fed
The Scariest Chart Of The Quarter: Student Debt Bubble Officially Pops As 90+ Day Delinquency Rate Goes Parabolic
We have already discussed the student loan bubble, and its popping previously, most extensively in this article. Today, we get the Q3 consumer credit breakdown update courtesy of the NY Fed's quarterly credit breakdown. And it is quite ghastly. As of September 30, Federal (not total, just Federal) rose to a gargantuan $956 billion, an increase of $42 billion in the quarter - the biggest quarterly update since 2006.
But this is no surprise to anyone who read our latest piece on the topic. What also shouldn't be a surprise, at least to our readers who read about it here first, but what will stun the general public are the two charts below, the first of which shows the amount of 90+ day student loan delinquencies, and the second shows the amount of newly delinquent 30+ day student loan balances. The charts speak for themselves.
This is how the Fed described this "anomaly":
Outstanding student loan debt now stands at $956 billion, an increase of $42 billion since last quarter. However, of the $42 billion, $23 billion is new debt while the remaining $19 billion is attributed to previously defaulted student loans that have been updated on credit reports this quarter. As a result, the percent of student loan balances 90+ days delinquent increased to 11 percent this quarter.
oh and this from footnote 2:
As explained in a Liberty Street Economics blog post, these delinquency rates for student loans are likely to understate actual delinquency rates because almost half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. This implies that among loans in the repayment cycle delinquency rates are roughly twice as high.
We'll let readers calculate on their own what a surge in 90+ day delinquency from 9% to 11% (or as footnote 2 explains: 22%) in one quarter on $1 trillion in student debt means. For those confused, read all about it in this September article: "The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default" which predicted just this.
* * *
And so it's official: Pop goes the student loan bubble, as just confirmed by the Fed.
Luckily student debt is dischargeable in bankruptcy. Oh wait. It isn't.
Source: Quarterly Report on Household Debt and Credit, Household Credit Excel Source
These kids getting out of college can't find a job either. Its hard to payback your loan with no job and living in your moms basement. The deferred loans and the forebearance loans are going to be a bigger and bigger problem as time goes on.
Another popular option is to stay in school. As long as you maintain 1/2 time hours then you can automatically defer payments. Of course you may have to borrow even more money or take it out of your own pocket. I think that chart indicates that people are staying school and borrowing more money.
College isn't the problem, it's back in K-8 and in the homes, but no politician wants to tell folks "If we start doing things correctly now, then in 17 years you'll start seeing results".
We have to look harder at what college is supposed to be. Having Literature degrees and Music degrees is probably a luxury almost no one can afford. Literature and music are wonderful courses and all should be exposed to them--but to major in that has outlived its usefulness. A few can specialize after the Bachelor's degree, but the major should be something oriented to an employable career. I don't blame the students so much as I blame the unrealistic parents and the blind advisors.
We have to stop equating teaching and being a research institution. Too many universities see students as a necessary evil and reward for research whether the person can teach or not. Research institutions are obviously critically important but to think good research = good undergraduate teaching is a mix of stupid and disingenuous.
These kids getting out of college can't find a job either. Its hard to payback your loan with no job and living in your moms basement. The deferred loans and the forebearance loans are going to be a bigger and bigger problem as time goes on.
Exactly. Of course, some people voted for Obama because they are hoping their student loans are forgiven or the terms drastically changed. I really don't blame them if they got a non-bullshit degree and can't find work in that field.
I was talking to someone about their daughter going to TCU for a music major. The tuition was $40K a year. Ridiculous. Back when the Occupy movement had those people holding up signs that they spent $100K for a degree so they could get a a $30K social worker job. Yeah buddy, you NEED an education.
I have never been to College, but I have paid for four college educations. Out of my pocket.
If parents want their kids to have a college degree, then they need to bite the bullet and ant- up. Sure, you might not get that new Flat Screen, or eat Steak, or drive that New Car for a while, but it's you responsibility as a parent to see your kids through.
If you ever have an opportunity to deal with major universities, you soon learn that it's all about the dollar. It makes me laugh when parents get these little books telling them how much it will cost to send a kid to college for 5 years. (that is really what a Bachelor Degree takes now days). What ever anybody tells you, ad 50 percent to it for a realistic figure.
Just to make some of you feel good, the four top men in my Shop never went to college, and all four made $90,000 plus last year. Of course, the training they have recieved from us is equal to a college degree, but since it's 'blue collar', that doesn't count.
I have never been to College, but I have paid for four college educations. Out of my pocket.
Jackie, allow me to draw a comparison. I did graduate from college. My first two years were paid by an athletic scholarship, prior to me joining the Army. The final years were subsidized heavily by the G I Bill. I felt I earned the government subsidy after I fulfilled my 4 year commitment to the military. Does that make me a "taker?" Perhaps in some eyes but certainly not mine. Once again, I earned it!
As for my children, both graduated from college and both with student loans that I committed to pay entirely. The oldest, I paid for completely with absolutely no regrets. The youngest had partial scholarship assistance but 75-80% was paid by me. The 20-25% that was subsidized was something my youngest earned from being an excellent student. Was he a "taker?" Absolutely not! They are both wage earners, paying a much greater amount in taxes than he would have had they never gone to college.
As far as I am concerned, it was a win/win. The youngest received a nominal subsidy but the payback is that he is now paying a higher amount in taxes because of it!
The reality is that paying for a college education these days is simply not economically possible for a lot of folks, in the absence of student loans. I think it's great that Jackie paid for his kids college out of his own pocket, I'll do the same when my kids reach college age. But, not everybody is in a position to be able to do that when private college tuition is running in the $35K per year range. Even public university tuition rates are running around $20k a year. That is an economic deal-breaker for the average family. I saw yesterday that median household income is around $51,000. No kid is going to college on that level of parental income unless mom and dad have done a hell of a lot of saving.
I don't think college is for everybody but I think everybody who has the desire for higher education ought to at least have an opportunity to pursue it. Lots of folks do very well without it, but the reality is that a college education goes a long way towards financial security over the course of a lifetime.
But, not everybody is in a position to be able to do that when private college tuition is running in the $35K per year range. Even public university tuition rates are running around $20k a year.
For what?
And their parents go out and buy a 2013 Escalade on a 72 month loan @ 10% interest.
For what?
As for Federal guarantied student loans, funds can be withheld from income tax refunds to repay the loans.
And their parents go out and buy a 2013 Escalade on a 72 month loan @ 10% interest.
Are you speaking in generalities or do you have something much more specific as it relates to the actual percentage of "their parents" who actually purchase "a 2013 Escalade on a 72 month loan @ 10% interest?"
Are you speaking in generalities or do you have something much more specific as it relates to the actual percentage of "their parents" who actually purchase "a 2013 Escalade on a 72 month loan @ 10% interest?"
One can go to HCC for 2 years to get the basics at about $6,000 tuition and books, and
then finish 2 years at U of H for an additional amount of about $12,000 for a total tuition and books of around $20,000 ... 4 years to graduate.*
How much does an Escalade cost ... drive out with interest for 6 years?
* I just checked their websites.
That's MY point.
Also, if a kid THINKS ahead ( and many do) keep clean, work, and do well in school then apply for grants and scholarships to offset the out of pocket ... you had a scholarship .... "two" actually!
One can go to HCC for 2 years to get the basics at about $6,000 tuition and books, and
then finish 2 years at U of H for an additional amount of about $12,000 for a total tuition and books of around $20,000 ... 4 years to graduate.*
How much does an Escalade cost ... drive out with interest for 6 years?
* I just checked their websites.
* I didn't check any websites.
Neither do I know of any of "their parents" who actually purchased "a 2013 Escalade on a 72 month loan @ 10% interest?"
I was hoping that since you raised the issue you would be able to actually provide specifics as opposed to speaking in generalities. Apparently you can't!
One can go to HCC for 2 years to get the basics at about $6,000 tuition and books, and
then finish 2 years at U of H for an additional amount of about $12,000 for a total tuition and books of around $20,000 ... 4 years to graduate.*
How much does an Escalade cost ... drive out with interest for 6 years?
* I just checked their websites.
That's MY point.
Also, if a kid THINKS ahead ( and many do) keep clean, work, and do well in school then apply for grants and scholarships to offset the out of pocket ... you had a scholarship .... "two" actually!
Two things: what does the cost of an Escalade have to do with the discussion? I doubt too many parents making the median income of $51k are buying 2013 Escalades.
And....post your links. I just checked the University of Houston, Texas Tech and UT websites for tuition info and what the universities are posting up for public consumption don't come anywhere close to matching the figures you've posted. It's more like $5k to $6k per semester, not per year. Then, you've got books, rent, food, insurance, and all the expenses. You're looking at a minimum of $15k to $20k per year and that's figuring minimal expenses. Figuring $10k for just tuition, what is the minimum amount a person can live on? $10,000 a year? Maybe if you live in a tent and eat beans every day.
Two things: what does the cost of an Escalade have to do with the discussion? I doubt too many parents making the median income of $51k are buying 2013 Escalades.
The price of an Escalade has nothing to do with the discussion. I suspect his reference was LL(DINO) being his arrogant, obnoxious and condescending self! He's actually quite good at it and has quite a few years of experience!
And So It's Official: Pop Goes The Student Loan Bubble, As Just Confirmed By The Fed
