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Delinquencies On Student Loans Surpass Those On Credit Card Debt

Tyler Durden's picture


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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Thu, 02/28/2013 - 12:50 | 3286165 YBNguy
YBNguy's picture

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.

Thu, 02/28/2013 - 12:59 | 3286204 onewayticket2
onewayticket2's picture

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.


Thu, 02/28/2013 - 13:12 | 3286256 DJ Happy Ending
DJ Happy Ending's picture

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.

Thu, 02/28/2013 - 13:19 | 3286322 Common_Cents22
Common_Cents22's picture

they are too dumb to realize anything.  They'll be given their talking points that its evil big business fault.

Thu, 02/28/2013 - 13:26 | 3286354 Divided States ...
Divided States of America's picture

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.

Thu, 02/28/2013 - 14:18 | 3286593 Bicycle Repairman
Bicycle Repairman's picture

This is how we keep the unemployment #s down and keep food lines from forming.

Thu, 02/28/2013 - 14:47 | 3286723 bsdetector
bsdetector's picture

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.


Thu, 02/28/2013 - 17:53 | 3287765 de3de8
de3de8's picture

Only for a little longer.

Thu, 02/28/2013 - 17:24 | 3287623 Mrmojorisin515
Mrmojorisin515's picture

who does obama work for?  lets see some of your "common_cents"


Ha better yet         http://www.youtube.com/watch?v=nmJKY59NX8o

Thu, 02/28/2013 - 12:59 | 3286205 Dr. Richard Head
Dr. Richard Head's picture

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.

Thu, 02/28/2013 - 13:32 | 3286370 moonman
moonman's picture

Roger Waters would be proud

Thu, 02/28/2013 - 13:35 | 3286382 Divided States ...
Divided States of America's picture

If the education was any better, the kids nowadays would realize what the fuck is really going on...

Thu, 02/28/2013 - 14:09 | 3286551 RebelDevil
RebelDevil's picture

When the cafeteria is constantly playing CNN on the TVs, you know the admins love to spread propaganda, or are themselves sheeple!

Thu, 02/28/2013 - 14:26 | 3286627 Jack Burton
Jack Burton's picture

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?!?!

Thu, 02/28/2013 - 20:53 | 3288440 DaveyJones
DaveyJones's picture

I wondered how that university president wound up in Guantanamo

Thu, 02/28/2013 - 20:52 | 3288368 DaveyJones
DaveyJones's picture


Thu, 02/28/2013 - 13:02 | 3286219 Skateboarder
Skateboarder's picture

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.

Thu, 02/28/2013 - 13:06 | 3286246 DaveyJones
DaveyJones's picture

luckily, I started drinking before I went to college

Thu, 02/28/2013 - 13:07 | 3286251 yabyum
yabyum's picture

Skateboarder, You missed move into folks basement. fixed

Thu, 02/28/2013 - 13:12 | 3286287 Skateboarder
Skateboarder's picture

 How joyous it must be for a parent to never stop hearing "can Billy come out to play?"


Thu, 02/28/2013 - 13:20 | 3286325 insanelysane
insanelysane's picture

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.

Thu, 02/28/2013 - 13:20 | 3286327 FEDbuster
FEDbuster's picture

or cries of "Ma where's the meatloaf!!!!" from the game room/bedroom in the basement.

Thu, 02/28/2013 - 16:45 | 3287443 willwork4food
willwork4food's picture

Or.."When on earth are you geezers gonna die so I can take over your digs?"


Brings a tear to my eye..

Thu, 02/28/2013 - 15:31 | 3287011 Lendo
Lendo's picture

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.

Thu, 02/28/2013 - 13:12 | 3286288 jcaz
jcaz's picture

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....

Thu, 02/28/2013 - 14:11 | 3286560 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

with no credit balance and something like 40% apr

Thu, 02/28/2013 - 13:59 | 3286489 NEOSERF
NEOSERF's picture

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.

Thu, 02/28/2013 - 12:52 | 3286173 EscapeKey
EscapeKey's picture

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.

Thu, 02/28/2013 - 12:56 | 3286191 krispkritter
krispkritter's picture

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)

Thu, 02/28/2013 - 13:03 | 3286225 McMolotov
McMolotov's picture

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.

Thu, 02/28/2013 - 14:07 | 3286538 RebelDevil
RebelDevil's picture

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.

Thu, 02/28/2013 - 14:21 | 3286599 Bicycle Repairman
Bicycle Repairman's picture

So the co-signer does military service?

Thu, 02/28/2013 - 15:48 | 3287127 MachoMan
MachoMan's picture

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.

Thu, 02/28/2013 - 13:12 | 3286285 hungrydweller
hungrydweller's picture

Excellent observation!

Thu, 02/28/2013 - 12:57 | 3286197 Don Smith
Don Smith's picture

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. 

Thu, 02/28/2013 - 13:05 | 3286237 EscapeKey
EscapeKey's picture

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.

Thu, 02/28/2013 - 13:08 | 3286254 tarsubil
tarsubil's picture

It is almost as if they want us to become debt serfs. Hmmmm.

Thu, 02/28/2013 - 13:09 | 3286266 McMolotov
McMolotov's picture

You're looking for sanity from a system which has been overrun by sociopaths.

Thu, 02/28/2013 - 14:32 | 3286653 DaveyJones
DaveyJones's picture

"sociopaths" ?

you're too kind

Thu, 02/28/2013 - 16:23 | 3287315 MachoMan
MachoMan's picture

actually sociopathy is INCREDIBLY rare...  these folks are just normal, every day opportunists...  guided by that same light inside all of us...  self interest.

Thu, 02/28/2013 - 13:10 | 3286268 Ghordius
Ghordius's picture

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

Thu, 02/28/2013 - 13:11 | 3286281 Ghordius
Ghordius's picture

and note that US prisons are increasingly too for-profit corporations with lobbyists

they need growth - they get growth

Thu, 02/28/2013 - 14:21 | 3286602 EscapeKey
EscapeKey's picture

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.

Thu, 02/28/2013 - 13:15 | 3286302 jcaz
jcaz's picture

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.....

Thu, 02/28/2013 - 14:13 | 3286567 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

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

Thu, 02/28/2013 - 13:54 | 3286444 DaveyJones
DaveyJones's picture

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...  

Thu, 02/28/2013 - 17:39 | 3287687 SmittyinLA
SmittyinLA's picture

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"


Thu, 02/28/2013 - 14:15 | 3286576 RebelDevil
RebelDevil's picture

A degree is not collateral. There is no collateral, hence why it can not be discharged.

Thu, 02/28/2013 - 15:45 | 3287109 EscapeKey
EscapeKey's picture

both secured as well as unsecured debt exists.

why is student debt supposedly (by your argument) secured?

Thu, 02/28/2013 - 12:53 | 3286176 krispkritter
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Welcome to Generation D(ebt)...FOARWARD!

Do NOT follow this link or you will be banned from the site!