Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

Student Loan Bubble: The Hidden Reality

Posted by Larry Doyle on September 5, 2012 10:00 AM |

America is increasingly aware that the student loan bubble is a major problem for millions of students, families, and our nation as a whole. While far too many politicians from both sides of the aisle talk in platitudes about the need for education, few if any of these politicians are willing to pull back the cover and expose the ugly reality embedded in current data on the student loan bubble.

Yes, America knows that total student debt now exceeds all other forms of consumer debt. We also know that total student debt is now approaching $1 trillion dollars. I personally believe that the cost of education at public and private colleges and universities has to adjust downward but that reality does not appear imminent.

What don’t we know about student debt and how will it hurt us? Let’s navigate. 

A recently released report by Demos highlights that the Student Loan Crisis Continues to Escalate,

The student loan crisis escalated further in the second quarter of 2012, as the amount of outstanding debt reached the highest level ever recorded. A new report from the New York Fed suggests that even while the rest of household debt improved since March, driven by decreasing credit card and housing debt, student loans have worsened.

Their report finds that, while overall household indebtedness declined $53 billion from the first quarter of 2012, student loan debt rose $10 billion to reach its $914 billion peak.

The picture is even bleaker than it appears.

Although the delinquency rates for student loans rose to 8.9%, that number is understated. It doesn’t account for people who are currently in a deferral period from their loans or for students currently enrolled in college, who’ve taken on more student loan debt than any preceding generation.

Should you exclude students currently in college, and who are therefore exempt from becoming delinquent, the delinquency rate rises from 8.9 to 21%. That’s a startling high number, double the amount of credit card delinquencies (10.9%).

A delinquency rate of 21% spells a near certain crash and doomsday scenario for both borrowers and lenders alike but will also serve as a serious drag on our economy as a whole.

Navigate accordingly.

Larry Doyle

ISN’T IT TIME to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook?

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

Recent Posts