The Scariest Chart Of The Quarter: Student Debt Bubble Officially Pops As 90+ Day Delinquency Rate Goes Parabolic

Tyler Durden's picture

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

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vinayjha's picture

US is now 100 billion away from hitting 16.395 trillion debt limit. With high unemployment of student, this loan will never be payed off.

cossack55's picture

One can't repay student loans and do justice to "black Friday". Uh-Duh!!! Its all about the priorities, and the US needs high consumer(sheeple) CONfidence.

SMG's picture

What kind of society saddles it's future with unescapable debt?  How can we allow the Elite, the connected bankers, the corrupted government, to abuse our young people like this?  It's time for change. No more debt slaves!  It's time for liberty!

(Well I can dream can't I?)


dbTX's picture

No SMG, you are no longer allowed to dream; it's still hope and change you need to concentrate on the next four years. The first four didn't get it done.

TruthInSunshine's picture

Don't worry, for "record retail sales" on gross revenue of doorbuster specials that are loss leaders (since people are more desperate than ever to wait for deeply discounted towels, 400" 3d LED HDTVs. food, hardware supplies, made-in-Myanmar clothing, buy one-get one free cracker jack homes made of disintegrating materials with a 100 year 3.2% mortgage financed by FHAakaActualTaxpayers), will save the economy, because this will generate highly positive but very misleading Lame Ass Stream Media (in the Sell-Side & Ministry of Truth@dot. gov) headlines that the Algos will go apeshit over (and that the insiders who get tips on trial meds from University of Michigan "researchers" will manipulate to pump & dump the shit out of it) will proceed...

...for some time longer...



francis_sawyer's picture

You mean to tell me that the University of Phoenix [Fighting Phonecians] want their money for giving me a grade A education in my pajamas?...

CH1's picture

It's even worse than the article says.

Most of the "good" loans are on a "pay according to ability" basis... scheduled to be paid off in 500 years.

They will NEVER be paid.

TruthInSunshine's picture

Just because I can (okay...okay...It's REQUIRED, BITCHES!!!!):



Get as many students in not dischargeable loans even in bankruptcy (except in quite narrow circumstances) at 35k to 200k with degrees from everywhere from (go to college in your pajamas with Shannon Dougherty or whatever her names is Oh My God!!! or an actual real university, for that matter to get an associates to graduate degree that will allow you to make $10/hour in a highly skilled position at a manufacturing facility - really - or $14 as a shift manager at McDonald's, bitches):3005252

economics9698's picture

My kid got a 69% haircut on his loan.  His secret?  He threatened to not pay the loan and then followed through on it.  After a year of negotiations he got his 69% discount.

When you are young you have that leverage, use it.

wee-weed up's picture

And how did that action affect his credit rating?

killallthefiat's picture

Looks pretty seasonal to me, except for last year.  Q2&Q3 look the similar in all other years...adjusted logarithmically

economics9698's picture

wee-wee, apparently not much since he got a new car loan with no problem. 

TruthInSunshine's picture

Thought experiment (highly subjective):


What's worse, doing as they say to do, or doing as they do, bitchez? (I honestly don't know if there's an objectively "correct" answer in such an atmosphere of cultural, moral and economic decay and rot that we're living through, and that's a deeply philosophical question - see Nietzsche):

Mortgage Bankers Association Strategic Default

Anyone? Anyone? Bueller?

cossack55's picture

Whats best: don't play

Would you sit down at a poker table knowing everyone seated is cheating and their goal is to take your FRNs?

Build your own table.

TruthInSunshine's picture

The two most scary words in the english language:




(And not necessarily in that order, bitchez)

TX-Mike's picture

And you are PROUD of that?  Effing loser..  Guess who pays for all of that bullsh!t?  WE DO...

NO ONE puts the pen in your hand to sign up for the DEBT.

There used to be SHAME when people didn't honor their word (contracts)... now it's just "who can I screw over to get ahead?"..

Eff all of you who think that way.  

If I "Go Galt" it will be because of you effers as YOU are the problem and the gov't is just the symptom!

A Nanny Moose's picture

Your point is valid however, you blame the person who was education...err...indoctrinated in 12years of pewblik skewlz for this cluster fuck? You blame people who have been told that they need an education to be somebody.

I blame those of us who consent to theft, especially the leveraged type, that burdens those who are yet to be born, which requires that government push future generations into participate in the knowledge ponzi, in the hopes that a future generation of educated innovators will provide the productivity which can be futher leveraged, in order to buy yet more votes.

economics9698's picture

The bankers create this shit out of their ass.  31% is a lot for some paperwork.

When the bankers use gold or silver then I will change my attitude.

SeattleBruce's picture

There's more than one side to responsibility, and this is not the best way to oppose the bankstas.

boogiedown's picture

His point may not be valid, if it is a private loan not guaranteed by taxpayers, AND if the kid took out the loan in good faith from the begining

EscapeKey's picture

I am so fucking tired of this bullshit argument.

When someone takes out a loan, the lender is responsible to do due diligence on this debt. The lender does not have an explicit right to get paid back, the interest rate in part reflects a default risk.

If the lending entity is not sure about the credit worthiness of the borrower, the loan should not be granted. You must be seriously fucking blind to insist that mortgages were always granted to worthy borrowers.

And finally - there should not be a such thing as non-dischargeable debt in case of bankruptcy, as it's essentially the same thing as debt slavery.

sumo's picture

Wait, wait, wait wait wait .... are you ... talking about a free market contract where there is responsibility on both sides?

Ermigerd dude, that's like ... communist or something. What's the point of being rich and powerful and stuff if you can't, you know, avoid all responsibility?


boogiedown's picture

yep, too risky. that's why i agree with "neither a borrower nor a lender be"...i'm paying off my existing SL and I'm out. people keep urging me to go to grad school, and I'm like "do you have 80k to give me? then no thanks, doin' fine with my library card"

CitiStank, my servicer, refused to negotiate with me while I was job hunting even though I never missed a payment, wonder how this kid got such a reduced rate -- I should have him get on the phone for me!

Renewable Life's picture

That's fucking brilliant!! Borrow money and only pay 30% of the principle back!!! What's amazing is your fucking bragging about it on ZH like your kid accomplished something! With all due respect, I'd sure as hell NEVER hire your kid to take out my trash, let alone be responsible in a real position or ever pay them real money! When they grow up and fucking take responsibility for their actions and honor their commitments, come take talk to me!

Feel free to let the excuses roll, I'd love to hear your rational, actually!

Anusocracy's picture

In all fairness, you could say the same about anyone that has debts discharged.

Why tee off on just his kid?

economics9698's picture

The best way to get back at bankers creating money out of their ass is to default.

SeattleBruce's picture

What you're really doing is helping to hurtle the Federal Government toward the next massive bailout on the backs of hard working people.  Now I don't know you, or your kid.  Maybe he can't get a good job.  But playing debt/default games is not the best way for the public to fight the bankstas, nor to build a responsible future society, because you work directly against the most natural audience that you/we must reach to oppose them.  And unless you take it the next step and quit paying your taxes as part of a mass movement (and if you argued for that in conjunction with this, I may be more inclined to listen), what are you really accomplishing - because we'll just have to bail out these student loans as well (including your kid's) in a year or two.  Based on bail out reality, you're suggesting that the economy/society should reward your kid on the back of the kid who works hard to keep out of debt or pay off his/her loan (and on the backs of all the rest of us), all in the name of hastening the banksta collapse.  (Is that your point?)  The best option isn't robbing Peter to pay Paul, or Joe Sixpack to pay John Sixpack, but rather we should starve the beast...

The best way to fight the bankstas and corruption is to not get into their debt traps - to stay out of personal debt, to not buy what you don't need, to stack physical and other commodities and to fight for the audit and dismantling of the FED. The best way is to work for a non-debt based monetary system, which would give us a hope to reform our political system.  And I dunno, threaten to create a new country out of Texas, Oklahoma and TN for starters?  What's not best is to do isolated acts that burden the average hard working folks with more bailouts.

overbet's picture

So they can write it off and get a tax break the rest of us pick up. Good plan you are getting them good.

BraveSirRobin's picture

Gee, that will just make it harder for me and everyone else to get a loan. Each loan has 2 parties. Default has two parties to blame. The bank was stupid to lend the money, and the borrower was stupid to borrow it.

To go into a transaction with the intent to spend the money and default is, however, fraud.

The reason, I gather, that education loans are not dischargeable is exactly because of what this guy's son did. Once you have the education, they cannot take it away from you. So, after they give you the diploma, why not simply stop paying back your loans?

I would not personally give a college loan that is not collateralized by hard assets, or revocation of the degree conferred.


Jeep In Mud's picture

Hahaha.  Get upset dumbass.  I intentionally racked up $90,000 in debt before I defaulted on my mortgages.  Figured my credit would be bad.  I used my credit cards to pay off any student loans or taxes I owed for taking my 401(k) out early.  Fuck the system and anyone who attempts to make me feel "bad".  Hahaha.

My only issue now is what do I do with all my time.  2 houses the banks can't take.  No debt to my name (Chp 7).  And my bills are less than $400 a month.  So I borrowed much more and paid exactly ZERO back.

No excuses for my behavior.  I run myself like a corporation.

Take the government's dick out of your ass and stick it in your mouth and shut the fuck up.

BraveSirRobin's picture

" I intentionally racked up $90,000 in debt before I defaulted on my mortgages."

Careful what you write on the internet. This is an admission of fraud, possibly of a criminal nature. You never know who is trolling around on these blogs.

AldousHuxley's picture

admission of fraud can also be job application for banks.


goldman sach recruiter will give you  call for you to do this on a global scale.

spinone's picture

this is just business.  Don't think there's any ethics involved in borrowing money anymore.  Do you think financial corporations have any ethics?  Every tried to get paid by an insurance company? 

if it makes business sense to default on a debt, default on it.  don't let some misguided sense of ethics get in the way.  ever man for himself.

overbet's picture

We should let your kid run the country. With those principles he will surely be a strong edition to society.

NotApplicable's picture

My student loan is the only loan I've ever had where I've never once known the payoff date.

Of course, when one is saddled with a 9% non-dischargable debt, why would they ever want it paid off?


12ToothAssassin's picture

So what actually happens if you dont pay it back? Debtors prison?

Supernova Born's picture

The freshman class of 2008 now graduating?

How many were thinking they'd go to school and wait out the shit economy?

Ms. Erable's picture

About the same number of persons currently applying to grad schools so as to rack up even more debt for a worthless piece of paper that proves attendance.

derek_vineyard's picture

Fed funds are 0.00-0.25 ...give these (foolish) students  a break and tie their payments to that index.

ebworthen's picture

They can garnish your Social Security, and if you die take it out of your estate.

Of course you can apply to have it forgiven with a lot of stipulations, but the debt forgiveness amount is taxable.

Or, you can work in public service for a certain amount of time and have it forgiven.

SilverIsKing's picture

If you die, you can then pay it back by voting for Obama.

nmewn's picture

"Or, you can work in public service for a certain amount of time and have it forgiven."

This is what I expect to happen for most medical students...the Castro Plan. I can hardly wait to be a guinea pig, poked & prodded by some gum snapping nube, more intent on texting her boyfriend/girlfriend than finding out what ails me.

fonzannoon's picture

Does the military count as public service?

nmewn's picture


It's been used by both tyrants and the public to depose those same tyrants for centuries.

I would say it's a dual edged sword and the tyrants & the public know it ;-)

DaveyJones's picture

good point, it is one the oldest two edged trick - and the young are only going to hold out for so long.

infinity8's picture

I have a friend from back in the way-day (late '80's) that was smart but not rich. Went through med school and then gave the Navy 6 yrs. Don't remember the specifics but, if it didn't wipe the debt out entirely, it came close.

*to clarify, he was a Navy Doctor. I don't think basket-weaving majors with a French minor have the same options.

Cathartes Aura's picture

dude, illegals have the option to enlist for a green card - no basket-weaving needed.

infinity8's picture

are they trying to forgive student loan debt?