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Delinquencies On Student Loans Surpass Those On Credit Card Debt
Those who have been following our year-long series exposing the student debt bubble are by now well aware that this latest $1 trillion+ reincarnation of subprime will have a very unhappy ending. Which is why today's release of the quarterly Fed report on household debt and credit will hold few surprises for them. There is however, one data point which is notable: as of December 31, 2012, the soaring delinquency rate on student loans (first reported here, and subsequently confirmed by the Fed itself), has surpassed that of credit card debt.
Which makes perfect sense: because as consumers are still aggressively deleveraging their revolving balances, they are simply replacing them with far cheaper, Federally-funded credit in the form of non-revolving student debt, which as all know, is used for most other purposes but paying down study-related expenses. And why not: since the government is providing a cheap credit subsidy to the big banks, why should consumers not find the cheapest cost of funding. That everyone else will have to pay for this blow up when it ineivtably does happen, as every credit bubble always ends, is a different story.
And as a tangent, these three charts should effectively explain why the "Housing recovery", i.e., the second housing bubble is in full force in California and Nevada.
The epic California debt balance per capita:
And the rebound in Nevada, already highest, delinquency rate.
Source: NY Fed
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Obama will never address this, like during the SOTU he thinks more access to student loans and spending is required. We all know it's to keep NEETs off unemployment figures.
unless he's going for a third term, i think the younger generation is going to have a hard time getting their heads around just how used they were over the last 5 years. they thought this guy was on their side, but all he's doing is spending $200B a month of their money....and they dont even get jobs out of it.
Yeah right, they will blame it on evil corporations. Obama will always be a saint in their eyes.
I'm changing my name to DJ Unhappy Ending in honor of this article.
they are too dumb to realize anything. They'll be given their talking points that its evil big business fault.
I am sure half of those credit card debt also belongs to students....I see so many kids nowadays with all the newest gadgets, latest top brand name apparel. Fuckin kids are so spoiled nowadays....and oblivious to their apocalyptic future.
This is how we keep the unemployment #s down and keep food lines from forming.
Student loan debt locks in a new generation of debt slaves. When the status quo taxes the hell out of us to pay present liabilities it will also point to the student loan takers to pony-up because government debt is fungible.
Only for a little longer.
who does obama work for? lets see some of your "common_cents"
Ha better yet http://www.youtube.com/watch?v=nmJKY59NX8o
We don't need MOAR education.
We don't need interest rate control.
No liquidation in bankruptcy.
Benny leave those serfs alone!
All in all it's just another fiat ya'll.
Roger Waters would be proud
If the education was any better, the kids nowadays would realize what the fuck is really going on...
When the cafeteria is constantly playing CNN on the TVs, you know the admins love to spread propaganda, or are themselves sheeple!
What would happen if RT was played on the cafeteria TV's for a month and the kids saw a few episodes of Max Keiser?!?!
I wondered how that university president wound up in Guantanamo
.
Take loans -> Go to college -> Drink 24/7 [-> Get attendance certificate] -> Realize there are no jobs, so give up on loans, collect welfare from family or state -> Drink 24/7.
luckily, I started drinking before I went to college
Skateboarder, You missed move into folks basement. fixed
How joyous it must be for a parent to never stop hearing "can Billy come out to play?"
:)
You get to hear stuff like there is no soda in the house as they jump in the car with their friends to spend a day at the beach.
or cries of "Ma where's the meatloaf!!!!" from the game room/bedroom in the basement.
Or.."When on earth are you geezers gonna die so I can take over your digs?"
Brings a tear to my eye..
And finance cars through Ally Financial whilst working part time. Complete jokeshow and these grads think the government is there to take care of them.
No problem- issue two credit cards to each ex-student in default, problem solved- the matrix lines up again.....
Wow, I should work in the Fed with ideas like that....
with no credit balance and something like 40% apr
Oh he will address it...ignoring NV which will probably continue to be decimated as online gambling takes hold, all the numbers are going down. Ignore that they are 4x higher than mid decade you can spin this as a positive pretty easily.
I still don't get why student debt is non-dischargeable in bankruptcy. Surely the lender should never have a free pass on any debts, regardless of type.
To me, that's got debt slavery written all over it.
Wonderful leverage to get serfs to discharge Med school debt to become an Obamanaut Doktor or join their version of the Brown Shirts. Join up and we'll write off your debt! (because we're the only ones that can)
Exactly, aren't student loans pretty much federalized at this point? They'll come up with exemptions for people to fit whatever statist social engineering goal they have in mind. Military service in exchange for debt relief would be the first one that comes to mind.
Not necessarily. Good credit and a co-signer will get you a student loan from any private bank if federal loans are not enough to cover expenses.
So the co-signer does military service?
The public service exemption already exists and is used in full effect... for example, what do you think those useless law grads are doing? Desperately trying to get sub market salaries from nonprofits or government agencies... who, in turn, forgive the student loans after a few years. Net pay? Way more than market... good if you can get it.
Excellent observation!
The lenders got a law passed in (I think) the 90's after some high-profile cases where doctors defaulted immediately after graduation to the tune of over $100K in debt discharged.
Now, student loan purveyors can lend to anyone with a pulse and know that they can hound the borrowers (yes, debt-slaves) to their dying day, even garnishing SS benefits if necessary.
But surely the correct response to that would be to increase interest rates on this debt, or worst case refuse to lend to risky propositions - not create a situation in which all future (educated) taxpayers were to become serfs.
It is almost as if they want us to become debt serfs. Hmmmm.
You're looking for sanity from a system which has been overrun by sociopaths.
"sociopaths" ?
you're too kind
actually sociopathy is INCREDIBLY rare... these folks are just normal, every day opportunists... guided by that same light inside all of us... self interest.
EscapeKey, rephrase the question in the cultural dimension: isn't America the place where people are free - to try and to fail?
And remember that US universities are for-profit corporations with lobbyists
and note that US prisons are increasingly too for-profit corporations with lobbyists
they need growth - they get growth
oh don't get me started on for-profit prisons. not only is it essentially slavery, but it also creates all sort of perverse opportunities for those in the right (wrong) positions. like judges.
ya, but read the fine print- they ARE dischargable after 20 yrs.... Of course, you're non-productive at that point anyway, so might as well finally feed yourself, I believe is the thinking.....
i once asked a dept of ed person why they give loans out to people whose majors statistically give them no chance at repaying the loans.... i was told they would be sued otherwise.... federal dipshipts at their brightest
Yeah I remember that.
gee...the criminal lawyer in me (and probably a bankrupt lawyer) says that if a lender can show you're just fucking the system they can bust through and get you...with extra spanking.
But a blanket rule is turning the "victim" into the criminal. Hard to believe that would happen in banking and government...
Where do you get this "pulse" shit, many of these loans are to non-existant people with identification of the borrower impossible.
"but I have an ITIN number" doesn't help, shit a huge portion of the "educational institutions" are outright frauds, last night I saw 2 different edu commercials from 2 different entities to learn how to:
A: Make Cupcakes
B: Become a massage therapist
No, this wasn't a 1 day seminar for retards, but an actual educational instution(s) soliciting for students to get student loans to buy their "degree program"
A degree is not collateral. There is no collateral, hence why it can not be discharged.
both secured as well as unsecured debt exists.
why is student debt supposedly (by your argument) secured?
Welcome to Generation D(ebt)...FOARWARD!
They can't get credit cards. What they can get are government backed student loans that they can NEVER get out of - even in BK. Student loans help put kids on the debt hamster wheel and keep them there.
When you graduate your Visa,MC,andAmex get cancelled. Bwahhahahahah! Now just try to find a job.
It's not just kids. It is also middle-agers looking to re-train.
The collapse is coming from all angles, we've got nowhere to run and they know it. And I say we because us cockroaches, the little guys, will suffer. Not the godless, blood-sucking trolls at the top.
People always say cockroaches will be the ones who survive the apocalypse, so think like a cockroach. Keep a low profile and stay out of the light as much as possible and you'll do alright.
The ones who survive will be the ones least connected to and reliant upon the system, the ones who draw little attention to themselves and who can adapt to a shitty environment.
Oblameo will address it in the next bailout. Student bailout coming soon, along with legislation to end Presidential term limits.
... making of a slave generation ...
A permanent underclass dependent upon the government is every statist's wet dream.
Yeah, we had that for many, many centuries. It was called Feudalism, where a ruling elite -- called Aristocrats -- claimed they had the "divine" right to rule over the masses. Swap out some labels and you get the same thing resurfacing today. Except we now call the elite by titles such as Investors, Shareholders, etc., who calim they have a natural right.
In the past, when the elite robbed the poor, it was direct, material and visible. Today it's indirect, financial and mostly invisible to most people. It is not the mentality, intent or goal that have changed. It is the methods that have: from primitive to sophisticated.
2016 POTUS election will have Student Loan debt forgiveness above $50k as a way to "stimulate" the economy. I am a Libertarian, but every man has his price. Mine happens to be approximatly $250,000.
250K? Damn son, you fancy huh. I'd do it for a McWhopperSupremePlastic!
Yeah, I'm going on year 9 of private higher education ***BUTTTT*****
Its not some BS Art History degree
Bachelors and Masters in Accounting
JD
LLM
and the German langauge
is this your way of whispering to yourself that it will all be ok?
Maybe you can help the Germans find their gold and count it for them?
Obama is already implementing student loan forgiveness - people have incredibly short memories. Of COURSE they've stopped paying on the loans....
After 20 years. The schemes I've already seen to make that 20 yr amount as large as possible have been quite entertaining.
Unless you go to work for the government, in which case that drops to 5 years.
Where's my $60,000 of forgiveness that's been sitting around for over a decade? Ah, right, it's only for those students who have a loan after 2007, live in an area recently destroyed by a hurricane and whose last name begins with the letter X, just like his mortgage program. Coincidently, my government loan was sold off to a private institution. I wonder why. Lunch break is over, back to work.
Wait until the fucking subprime auto one kicks in like fucking chuck Norris on fucking bath salts.
Fuck you Obama, you fucking welfare ip. Fuck off you crooked Chicago bank ass wiping fuck.
Could you perhaps be a bit clearer on how you really feel?
"...like fucking Chuck Norris on fucking bath salts."
Goddamn poetic.
art.
"like fucking chuck Norris on fucking bath salts"
Somehow I can't seem to shake the image of a naked Chuck Norris throwing round house kicks at random people with chunks of human flesh hanging from his mouth. Nice imagery LSL.
When he's in the office, best not say "I need a three-hole-punch".
don't worry, that money was used to buy equally useless products
Here's how much debt I have: $0
Cars paid in full. 2 Homes paid in full. And a rather nice wad sitting in non-US banks. Not to mention my stacks to ensure it stays the way it should. Good luck poor people!
BULLISH......As soon as all those upside down students give up and quit looking for a job the unemployment "numbers" will improve. Party on you crazy kids.
"If banks, insurers, and corporations don't have to pay their bills - why should I?"
IIRC there was something new in consumer protection that seriously slowed down foreclosures? So a rise in NV is happening even as the new rules take effect....stunning.
The casinos eventually wind up with everyone's money.
Bernanke and the Fed will simply devalue the US dollar by 70% again. That's what their planing.
oh well if people on fixed income go starving.
It's all about ever increasing debt.
Student loans have been gradually made non-dischargeable through bankruptcy since 1976, but the real hammer hit in Joe Biden's Bankruptcy Bill of 2005. Subsequent Supreme Court rulings allowed the Feds to withhold Social Security and other entitlement payments to debtors and their co-signers.
In 2005, when the Bankruptcy Bill was making its way to a vote, I noticed a big media full-court-press to tar individuals as greedy, lazy and irresponsible; buying up all manner of goodies and then dodging the bill through BK. I knew a few people who had done personal BK's, but every single one of them had had a medical crisis; some coupled with divorce or loss of job, but medical being the primary driver. So I knew the media scapegoating was a smokescreen. That was also the time I realized that the home mortgage finance situation had become completely irrational, and was going to collapse. And the health care finance bubble. And the cost of college had become unaffordable for most people, even if they didn't know it yet. It was becoming obvious that the middle class was tapped out, and a financial collapse was unavoidable.
Right then I started to realize that TPTB knew all of these finance machinations were going to collapse, and they would use all the power they had bought to allow them to stuff their pockets as deeply and for as long as they could manage it, until the wheels fell off. I figured we'd hear about crisis after crisis, and the common factor would be a pitch that we all have to turn over every pile of wealth in the country to the finance industry in one way or another; be it fees, government bailouts, formerly "free" services now being a la carte, restrictive rules tightening up; you name it; at every turn, we were going to be skinned rather than fleeced. It would be incremental, each time positioned to us as a specific response to a specific crisis, and if we didn't assume the position it would be the end of the world...until the next crisis. The cycles of crisis would tighten and tighten and get more and more frequent. The underlying cause, which must never be mentioned, would be that an economy can't support a finance sector that skims off any more than the 5% that had traditionally been its share of the economy, but which has now risen to nearly 40% give or take. Rather than restore finance to its rightful and healthy role in the economy, the furniture would be burned to boil up the seed corn.
I haven't seen a single thing in the subsequent 8 years to change my mind.
Subsequent Supreme Court rulings allowed the Feds to withhold Social Security and other entitlement payments to debtors and their co-signers.
Is this all debts, or just Student Loans?
It only applied to Student Loans, mainly because they are totally unsecured and tend to be around as much as a typical new car loan (if not much more). Back then banks were more involved in the loan and collection process as this was well before Obama took over the student loan industry. The banks weren't willing to do these large, unsecured loans and wanted recourse of some type. Anything for the bankers!
What "Sluggo" said. I was just talking about Student Loans. The rest of the Bankruptcy bill imposed more stringent limitations on BK debtors, like mandatory credit counseling, more burden of proof of inability to pay, etc. Most of that didn't make much difference to the vast majority of BK consumers. They just had to wait longer and spend some quality time with somebody else telling them, "Yep, you're bankrupt."
I haven't noticed that the Bill has impeded strategic bankruptcies by wealthy and/or savvy and lawyered-up people and corporations looking to dodge out of contractual obligations, though. Just made utterly insolvent people eat some more dirt.
great post
and look how far we've fallen since.
Back then the banks succesfully pushed themselves as the victims
This time around, in 2008, the facts were so clear, they couldn't even sell that. No one questioned they were the criminal cause
and what happened
The law has completely gone under
Of COURSE they've stopped paying student loans. Don't you remember? Obama promised FORGIVENESS for student loan debt....
obama slaves. join up with obama's army for 10-20 yrs and your debt will be forgiven! a chicken in every slaves pot.
*Only applies to future loans.
As of 2014, if graduates make timely payments each month, loans will be forgiven in 20 years! This is a huge deal for those who expand out their loans to the maximum. According to The New York Times article "Student Loan Overhaul Approved by Congress" (March 25, 2010), writers David M. Herszenhorn and Tamar Lewin report, "those who take out new loans after July 1, 2014 . . . [who] keep up their payments will have their loans forgiven after 20 years, reduced from the current 25."
Read more at Suite101: Obama Student Loan Debt Forgiveness | Suite101 http://suite101.com/article/obama-student-loan-debt-forgiveness-a222669#ixzz2MDQFZzUJ
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I don't have a source, but I remember hearing about even earlier (10 yr?) forgiveness if you work in "public service" (read government or non-profit). Should be forgiven based on how many jobs your start-up business has created!
Texans like those new wheels! Slaves
Student loan suicides... on the rise.
Kiddies (many well into their 20s) should not be permitted to sign their lives away with the stroke of a pen.
Are you advocating against the military? I mean, I agree if that's the case. But if not... think about it.
Who do these crazy kids think they are, Indian farmers?
that's why they're going to solve both problems by letting them kill themselves in the army while working off the loans
As the REAL economy worsens, I'd expect more young people to go to school for an 'elite' education. In the hopes of landing a job they can't get now. As the gap between hope and reality widens, the debts will rise. Debts that cannot be cancelled by bankruptcy.
And since a big part of education is for people to think, where exactly is the critical thinking going on here? These brainwashed fucks don't even know a damn thing about the monetary system! And we're supposed to feel sorry for their ignorance and hopium addiction?
And some people still can't figure out the reason for the incessant "dumbing down" of the masses over the past 50 years. Heheheheheh.
Yes indeed! I told my kids if they want to get a degree in some foo-foo liberal arts program, that I'd disinherit them. They can do that after they're financially independent and can afford to have a "good time" or pursue their "flights of fancy" -- like the elite & aristocrats of old did.
For now, I told them, stick to degrees or trades that are portable and self-employable. And if you want to improve on that, be sure to strive for being The Best, as the world will ALWAYS need people with real skills and who are one of the best. Be a leader (of sheep), not one of them. And you can't be a leader if you follow trends, rather than cause them.
g
FTS
(Full Time Serf, or substitute your own)
Don't kid yourself, there isn't 2 pools of debtors, its all the same broad, the psych-major with 2 bastards working on a 3rd donor dude to pay her bills.
"To be in debt before you ever make money is to never be in debt in the first place".
- Random Fed Desk Banker
The government loves stupid people. Stupid people are forever dependent on the government. Stupid people get ridiculous loans to buy things they can't afford. Stupid people often drink the kool-aid. Stupid people vote for people who give them more handouts.
That's it. I may be retired, but, I'm going back to school so I can get a cheap student loan and buy gold with the loot.
Let's see, what shall I study? Do they still use nude models in sculpture class?
Yes, take out all you can.
Bet against the debt!!! We will see massive inflation with all the Fed's printing.
We are already seeing it.
Yah, not liking where gold and silver are today and recently. Hurts. BUT, no debt, house paid for and several hundred oz of AU. Meanwhile, gold stocks are waaay down. But comparitively, I should not complain except that all the world is a mess bcause of the FED.
I know of 2 ways to get out from under student loans:
1 Work in some jobs (military, medical in underserved areas, probably teaching) and get X per year knocked off the total.
2 Consolidate your loans, pay 10% of your income for 20 years, then the rest is forgiven.
My kids have "educated" me. I haven't convinced them of a more ethical method (ie work your butts off and pay the damn things).
If you go to work for the government, X is 20%.
Down vote isn't against your comment; it's against that program! Let's encourage people to work for the government. That'll fix things. Read a recent article (sorry, no source) that stated 70% of current college students want to work in non-profit ("helping people") or for the govenrment ("good benefits and job security"). We're screwed!
"which as all know, is used for most other purposes but paying down study-related expenses."
Bullshit. Tuitions and Financial Aid are in a vicious cycle of inflation. By the time tuition is paid by loans and grants, there usually isn't much left to pay for R&B and books if you aren't upper middle-class.
This is the situation for real universities like UPitt, UPenn, Purdue, Penn State, Ohio State, Saracuse, ect.
For the fake colleges like U of Arizona (and possibly CC's), yeah, people waste their tuition money if they can get the money directly, instead of indirectly from the university.
As long the university gets the funds first, there is no problem in regards to dodging tuition payment.
Subsidies = higher tuition = subsidies = higher tuition = subsidies.
90-10 Rule
http://mycareercounts.org/pdfs/CCi_90Rule_Background_2.9.11.pdf
Those of us who paid off our debts will be settled with the burden of those who don't. It took me 12 years to pay off all my student loan and credit card debts after I graduated from college. Just knowing that the tax payer will eventually fit the bill for those who decide to just stop paying is, to say the least, nauseating.
I met a lady the other day that had to be pushing 70 years old, she is going to school!!!!
Good luck collecting that debt!
It isn't exactly a reincarnation of subprime. It isn't like they can repossess that $40,000 education (for lack of a better word), you know.
This will not have an unhappy ending for the students who took out too much debt. It will be unhappy for tax-payers. Student loans will be another government bailout program. It is fait acompli.
Let me guess Wall Street buys the debt....and they are bailout by main street...ONCE AGAIN!
If you were a betting man, would you short SLM?
What's next after student loans? Where does the Free Shit Army stop next to get their funding?
Yeah, but somebody has to keep funding the black athletes, overpaid coaches, administrators, and developers. After all what is most important is winning an NCAA basketball or football tournament for "publicity." Fuck educating.
That somebody is you! The American middle class debt slave sucker.
Now bend over and receive coaching, while the shower is nice and hot.
People lose their jobs and rely on payday loans from time to time so stopping student loan payments is in the first position in the strategic default matrix....In addition, I think that the dark secret in the student loan mess is that student loan debt rose because it was the only debt available in the recession. People took out student loans to live on because home equity was tapped as well as credit cards. The truth is enrollments are down in all categories of higher education.
FRBNY has pumped up the numerator with non-delinquent loans and has artificially removed performing loans from the denominator. The results are the artificially-high delinquency rates FRBNY presents. FRBNY seems more OWS than College Board. Wonder what their agenda is . . . wanting to nudge Americans into the service jobs that represent the real need for America's capitalists?