Student Loans Soar To Record $1.111 Trillion, Up 12% In Past Year

Zero Hedge ^ | 05/13/2014 | Tyler Durden

[SeekAndFind]

When the Fed releases its quarterly household credit report, the one item most focused on is the amount of mortgages outstanding and originated in the prior quarter, since courtesy of its monthly consumer credit updates we know that US households have largely given up charging their credit cards at the expense of non-revolving student and car loans. So here is the summary.

First, the good news: courtesy of ZIRP mortgage defaults and discharges tumbled in Q1, resulting in an increase in total mortgage debt balances of $8.17 billion, or an increase of $116 billion in the quarter. 

Now, the bad news: the increase in total mortgage balances had nothing to do with a surge in mortgage demand. Quite the contrary, as we have been reporting and as bank mortgage origination bankers have felt first hand, for whatever reason mortgage origination as a business has virtually slammed shut. The Fed confirmed as much when it reported just $332 billion in originations in Q1: well below the $452 billion in Q4, and certainly below the $577 billion a year ago.

In other words, the only reason why total mortgage balances did increase is due to a slowdown in either prepayments and/or discharges, which represents as the simple difference between Q1 originations and the change in total mortgage outstanding, tumbled to just $216 billion - the lowest in the past decade! One can be certain that absent a pick up in originations the total mortgage balances are set to tumble in the coming quarter as even this one last final refuge of the "consumers are releveraging" crowd is smashed.

But that is not to say that consumers have no interest in increasing their debt load. Quite the contrary. Because when one excludes those two conventional methods of leveraging up, credit cards and mortgages, US households are on an epic spending spree funded by, what else, student loans.

We have covered the topic of the student loan bubble extensively in the past so we won't waste more digital ink on where it comes from or what it means for the troubled US consumer, suffice to report that according to the Fed, in Q1 total Federal student loans rose by another $31 billion to a record $1.11 trillion, and up a whopping $125 billion, or 12% from this time last year.

For all the talk that the student loan bubble may have popped the demand for cheap, uncle Sam loans certainly is as strong as ever. The one places where the bubble may have popped, however, is the amount of delinquencies: at 11% it means that some $122 billion in student loans will never be repaid. And considering the Fed historically does a woeful job of accurately estimating the true delinquency rate, we would estimate that at this moment some $250-$300 billion in student debt is already 1 or more months delinquent with no intentions of ever being repaid.

 

[FlingWingFlyer]

Yikes! Programming “the children” to be good little Marxists and communists is getting expensive.

[Paladin2]

We need to outlaw Student Loans.

[rightwingintelligentsia]

How would mindless liberal youth get their degrees in Puppetry or Multicultural Gender Bias Studies Indoctrination Studies?

[BitWielder1]

Soaring student loans + No jobs to find = Not good.
Taxpayers will be screwed again.
I don't want to hear any one say "unexpected".

[GeronL]

Future Unemployable Americans

[Diana in Wisconsin]

This is going to impact our economy in a BIG way. These up and coming CONSUMERS don’t have two nickles to rub together while crashing in Mom & Dad’s basement. They are never going to own anything of more substance than the latest i-phone or tablet, and none of them are going to be able to earn enough to support the MILLIONS on SS and Welfare.

We truly have done a disservice to the youth of our Nation.

It’s going to cave in, completely; totally unsustainable.

[SpaceBar]

The debt will be forgiven by a two year stint in bambi’s greenshirts.

[GeronL]

Probably. More money down the debthole

[trisham]

"The bravest are surely those who have the clearest vision
of what is before them, glory and danger alike,
and yet notwithstanding, go out to meet it."

~Thucydides

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[andyk]

Eliminate the federal student loan program.

[GeronL]

Agreed

[Night Hides Not]

There will be no inheritance to bail out the kids: Mom & Dad have been talking with The Fonz about a reverse mortgage.

[CincyRichieRich]

We need to outlaw Student Loans.

---

Don’t worry; 0bommer has you beat; he’ll outlaw paying them back...it is a right, you know. We all need to work less, get a PhD in romantic literature and work at Panera.

[Dilbert San Diego]

We may well see such programs for forgiveness of student loan debt.

Under current law, it is very difficult to get student loans written off in bankruptcy. i expect an effort will be made to amend bankruptcy law to allow for these loans to be written off in bankruptcy.

[ProtectOurFreedom]

Sheesh...such pessimism. Our last of three graduated a year ago. All have excellent well-paying careers established. Two of them bought low-mileage used cars in the past few months. They bought affordable, utilitarian small SUVs, not flashy high-dollar cars. We’ve taught them to be thrifty, frugal and not live beyond their means. They all graduated with very modest student loans that will be paid off shortly. Most of their friends are in similar situations, too.

[freerepublicchat]

Makes the unemployment numbers looks better while subsidizing leftist educators.

It would be better if we just put these kids on welfare.

[CorporateStepsister]

Truth be told, everyone was hearing nightmare stories long before this became a regular issue on the newspapers. I decided a long time ago not to take out a loan and while I don’t have my degree, I do have the ability to say I’m debt free and that alone is worth not having that piece of paper/

I run my own business (not much to show for it, but I had a late start, rough road to be blunt) and I have a roof over my head and food in my tummy and unbelievable connections. I have my own thing going and with luck, I’ll be able to end up getting a good payoff in the near future and be completely secure.

So look, there are a lot of idiots who aren’t learning from the mistakes of others, and should apparently learn it themselves. It’s been common knowledge that major name universities costs obscene amounts and instead of going to a community college or perhaps getting a real education and not a degree in Stuffed Animals and spending the majority of the time partying or participating in some self created ‘revolution.’

For all the liberality of the professors, these universities do have enviable libraries and research facilities and it’s a gold mine for anyone who wants to really learn and work on independent study and projects and then be able to end up with the well stocked resume to really get a good job, showing that you have both education and experience.

I daresay that if I end up going to one of these places, I will be building experience for myself, not partying and participating in the 60’s revival protests that infect our campuses.

[Cementjungle]

Obama’s October surprise is going to be the writing off of all college loans. You heard it here first.

[freerepublicchat]

Don’t worry; 0bommer has you beat; he’ll outlaw paying them back...it is a right, you know. We all need to work less, get a PhD in romantic literature and work at Panera.

You write that as if the student loan program is some sort of giveaway to students.

The people making money off of this program are professional educators. The kids amass a huge debt while professors get to pad their nest.