Skip to comments.The Scariest Chart of the Quarter: Student Debt Bubble Pops as 90+ Day Delinquency Rate is Parabolic
Posted on 11/29/2012 5:18:13 AM PST by No One Special
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
The Scariest Chart Of The Quarter: Student Debt Bubble Officially Pops As 90+ Day Delinquency Rate Goes Parabolic
Yes it is and 99% of the people on this site don’t have a clue...
>>Luckily student debt is dischargeable in bankruptcy. Oh wait. It isn’t.
The country is making our young indentured servants to the government to feed the academia constituency. Terrible policy.
As ye sow, so ye shall reap.
Yes, Obama will control your health care and is your creditor in possession for young Americans. This effectively makes the citizenry indentured servants and forever beholden to their masters.
The beauty of that is, they only own the 10% of your disposable income part of your soul and only for 20 years. After that, all is forgiven...
I believe the forgiveness of student loans was contingent upon them “serving” in a government job for a specified period of time, and it was more than the 4 yrs required by a military scholarship.
It's criminal what is being done to those young and trusting Americans, a now lost generation that has been tricked into financing their own brainwashing and the salaries of those who will forever more hold their politically correct leashes.
Corralled, roped and tied and soon to be pulling their progressive yokes on the road to utopia.
Why be free when you can have free stuff instead?
and don’t forget legal weed !
Why did we ever allow young people to vote?
250 years ago European immigrants like my ancestors indentured themselves to come here. It took some 7 years or more to work off their passage and living costs
the future generation, educated into poverty by a govt debt-subsidized lifestyle, is being indentured by the federal govt to be able to live here
Why did we ever allow ANYONE to vote? People cannot be trusted with such a heady responsibility.
Rick Perry is working on a $10,000 college degree program (not for all degrees, but it’s a start). I have suggested to more than one young person that they take all they can at a community college first, then transfer to a regular college for the last year or two - saves a lot of money. In our area, college and community college partnerships are really good and credits transfer easily. Some kids should not go to college and go to a ‘trade school’ ... frankly, if things continue to collapse, being able to do something with your hands (fix things, make things) is going to be worth more than a college degree, from both a survival standpoint and a barter advantage.
The borrower will be slave unto the lender...............Proverbs 22:7
Agree with all of that.
We were with a group at dinner the other night discussing college tuitions. It is pretty eye-opening to look at what we paid 35 years ago vs. what we are paying for our kids today.
When a con man is found out and arrested, he is usually required to pay back the money he stole. If the American universities are conning people by claiming that they provide any value for the tuition they receive, then they should be required to pay back to the students a portion of the money they received. Why knowingly send your children off to be taken by con men for four years?
“Luckily student debt is dischargeable in bankruptcy. Oh wait. It isnt.”
Which is probably why the government took student loans away from commercial banks. Looks like a good way to either buy votes by forgiving debt or establishing a new cash flow stream via a payroll deduction plan. If debt is forgiven, I think all past students who paid off their loans and all parents who footed the bill for college educations should demand reparations. Sooner or later this false image of a college education as a job requirement and the granting of “useless” degrees is going to stop and colleges will have to face reality.
>>Sooner or later this false image of a college education as a job requirement and the granting of useless degrees is going to stop and colleges will have to face reality.
That is the real issue right there.
Of course you can’t give employment tests any more if the results are discriminatory by race, forget that blacks as a group don’t achieve academically anywhere near as well as whites do. So HR and hiring managers continue to use the college diploma as a filter.
They're getting their prerequisites out of the way, and saving tens of thousands of dollars in the process.
Brings to mind a scene from the film "Brazil" where the jackbooted government thug is interrogating the hero.
"Don't fight it son. Confess quickly! If you hold out too long you could jeopardize your credit rating."
I took some over my summer breaks, and it was brought up in many interviews. View is that if you are not ready for “real” college, you are not going to be a serious candidate.
Depends on the degree, but the diploma is not a statement of knowledge, but a brand. People will select the better brands.
I know people with kids, who have been LIVING on student loan money for the last several years. I imagine there are several million more just like them, only carrying enough classes to keep getting the loans.
I can only imagine what happens when they realize that Santa Government wants it’s money back, regardless.
And, every four years, from now on, they can go to the campuses and say “If you vote Democrat, we might pay off your student loans for you!”
My tuition at an “expensive” private college in the mid-80’s was around $350 a credit hour.
This year, at Purdue, a state-supported school, it’s $750 for general classes, $1,200 AND UP, plus fees, for “technical” classes.
don’t = doesn’t
There are times I really hate the auto complete function on my phone.
Depends on the CC, and the courses you take.
Everything I took was directly transferrable at full credit for my engineering degree. Back then (1970s) the prices were different, but not like today.
What WAS different was the quality of instruction. My calculus classes were taught by a guy who drew in multiple colors graphs of differentiation, integration and analytical geometry from a book that was very readable and understandable.
My poor buddy who went directly to the four year school was taught by a Chinese TA who wrote on the board simultaneously with both hands, and whose book was gobbledygook.
Guess who's much better at calculus still ?
But having that on my transcript came back to bite me a few times. Employers and recently grad schools ask why I took the classes at a community college, and one stated that is a “worrisome” thing.
The actual diploma comes from a four-year/”real” college ... most employers don’t look beyond that. My cousin went to two or three years of CC and then went to the ‘big/real’ college the last two years - saved a ton of money and I don’t think his diploma from the big college has ever been questioned. Bottom line, you can save a ton of money doing this, especially with ‘prerequisite’ classes.
“Why did we ever allow ANYONE to vote? People cannot be trusted with such a heady responsibility.”
More and more I get to believe that thoughts on this subject expresse in Heinlein’s “Starship Troopers” have great merit: military service is required to be a voter, aka “a citizen”. There may be other routes to be a citizen, but that is a primary one.