Student Loan Defaults Soar By 36% Compared To Year Ago

Tyler Durden's picture

The growing debacle that is the US student loan bubble - nearly the same size and severity as the Subprime crisis at its peak- has been painfully dissected on these pages in the past, so at this point the only thing remaining is to keep track of the bubble growing exponentially in real time as it hits all time records, and eventually pops. Helping us to track the realtime growth is the latest data from Equifax, via Reuters, which confirms what everyone knows: things in student bubble land are getting worse by the minute. Much worse, because in just the first two months of 2013, banks wrote off $3 billion of student loan debt, up more than 36 percent from the year-ago period, as many graduates remain jobless, underemployed or cash-strapped in a slow U.S. economic recover.

From Reuters:

The credit reporting agency also said Monday that student lending has grown from last year because more people are going back to school and the cost of higher education has risen.


"Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs," Equifax Chief Economist Amy Crews Cutts said in a statement.


The cost of earning a 4-year undergraduate degree has gone up by 5.2 percent per year in the last decade, according to the CFPB, forcing more students to take out loans. While other forms of debt went down, student loan debt continued to rise through the economic crisis.


Delinquencies have spiked in the last eight years, with about 17 percent of the nearly 40 million student loan borrowers at least 90 days past due on their repayments, a February report from the New York Federal Reserve Bank showed.

Er.... BTFD in the S&P (if there is a D of course - the way Kevin Henry is buying everything these days who knows)?

What else did you expect us to conclude here? It is painfully obvious by now that the farce will not end until the second coming of the stock, tech, housing, bond and, new entrant, student bubbles all pop spectacularly and at the same time, in the most epic Ben Bernanke organized New Normal credit supernova ever to be seen.

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LawsofPhysics's picture

Simply print some moar, fuck you Bernanke.

Supernova Born's picture

If they had only invested all their tuition in the market and stayed home for the last 4 years watching cartoons they'd be set for life.

Prof. Bernank should have warned them about putting their money ANYWHERE but the stock market.

LawsofPhysics's picture

"If they had only invested all their tuition in the market and bought some physical assets of real value, some revenue generating, then they would be set for life" - fixed.  Unfortunately, when fraud becomes the status quo, possession becomes the law.  I know a recent graduate who bought rental properties.  That investment has created a very real revenue stream.  He only rents to students if the parents co-sign to cover the rent for the term of the lease.  His other renters are retired .gov employees.  Smart kid.

idea_hamster's picture

So the name of the Chief Economist at Equifax that is telling us that all the student loan lenders are going to take “haircuts” on these loans is “Amy Crews Cutts”?



LawsofPhysics's picture

Total bullshit, it depends what you are getting for rent and what the payment is on the loan. This kid bought total shit properties, all under 30K, fixed them up and rented them out.  As an added bonus, the local university is building the new Vet School across the street from neighborhood where his rentals are.  Sorry, I don't see what he can collect for rent going down anytime soon.  Veternary medicine will be more profittable than human medicine in the near future, well, so long as people like to eat meat anyway (horses included).

ihedgemyhedges's picture

TD.  What?  No hat tip????


Vote up!

Vote down!


Well TD, good news is everywhere then as the student loan fiasco really gets rolling....,0,6746534.story

Son of Loki's picture

<<when fraud becomes the status quo, possession becomes the law>>


Possession is 10/10ths the law.

James_Cole's picture

If they had only invested all their tuition in the market and stayed home for the last 4 years watching cartoons they'd be set for life.

The most concise summation of modern western 'economy' I've heard in a long time!

Supernova Born's picture

A good credit score is a terrible thing to waste.

ParkAveFlasher's picture

If they had put the money in gold in 2008, they'd have ... say, Kitco down again.  That's happening a lot lately ;)

azzhatter's picture

FUCK YOU BERNANKE- the day I read your obit is going to be a fucking party.

azzhatter's picture

That means 74% are current. Better make more loans- Ponzi lives

Vendrell's picture

Careful - soars BY 36%, not to 36%. So if the default rate was say, 3%, its now at about 4.1% of total loans outstanding. If the actual default rate were 36%, well..... God help the banks and Sallie Mae *snicker*

TruthInSunshine's picture

The nearly trillion USD student loan market sees delinquency rates soar by 36%, while Obamacare will add an average of 34% to the average health insurance claims cost, with both student loan delinquency rates AND health insurance claims cost to soar to 80% (and beyond).

Good shit. It's not as if the extra $5,500 to $19,000 in additional health insurance costs per person or family, along with the massive adverse impact of student loan defaults, know...further crimp an already reeling American Consumer....

....Lean Forward!

Study: Obamacare to Raise Average Claims Cost 32 Percent (and as much as 80% in certain states)

ABC News ‎- 4 hours ago By RICARDO ALONSO-ZALDIVAR Associated Press WASHINGTON March 26, 2013 (AP)

Insurance companies will have to pay out an average of 32 percent more for medical claims on individual health policies under President Barack Obama's overhaul, the nation's leading group of financial risk analysts has estimated.


The report by the Society of Actuaries could turn into a big headache for the Obama administration at a time when many parts of the country remain skeptical about the Affordable Care Act.


The disparities are striking. By 2017, the estimated increase would be 62 percent for California, about 80 percent for Ohio, more than 20 percent for Florida and 67 percent for Maryland. Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said.

Dingleberry's picture

How does one get to short student loans like those MBS's? 


MonsterZero's picture

Written off student loan debt is simply tranferrred to IRS tax debt as the reciever of the write-off has to take that as income.  How are IRS defaults faring?

LawsofPhysics's picture

exactly.  Very hard to extract any sort of "tax" from the unemployed.  Do you here that?  That's the drums of war beating just a bit louder, hedge accordingly.

Id fight Gandhi's picture

Yes, we shall call this the "laugher" or "loser" curve. In jest of the laffer curve.

McMolotov's picture

"Step right up, step right up! Enlist with Uncle Sam to fight the Sand People and have your student debt expunged forever! Channel your sense of patriotism to kill two birds with one stone — your debt and the evildoers who live on top of our oil!"


And if you should happen to die in the process, well that's a bonus dead bird at no additional cost!

LawsofPhysics's picture

The problem is that in order to actually "fight" anything, a whole lot of inexpensive energy and real inputs will have to be consumed.  Sorry, try again.  The available energy for consumption won't support tradition wars anymore.  Baring Nukes, enough people simply don't die fast enough either.  In addition, you still need to feed those drone pilots, so you really haven't "solved" anything.

km4's picture

banks wrote off $3 billion of student loan debt, up more than 36 percent from the year-ago period, as many graduates remain jobless, underemployed or cash-strapped in a slow U.S. economic recover.

No worries just add this stat to ones below and the ben bernank will cover it 

The Global Financial Pyramid Scheme By The Numbers | Zero Hedge

The following is the global financial pyramid scheme by the numbers...

-$9,283,000,000,000 - The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to "guarantee" those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.

-$10,012,800,000,000 - The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.

-$10,409,500,000,000 - The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.

-$15,094,000,000,000 - U.S. GDP. It is a measure of all economic activity in the United States for a single year.

-$16,749,269,587,407.53 - The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.

-$32,000,000,000,000 - The total amount of money that the global elite have stashed in offshore banks (that we know about).

-$50,230,844,000,000 - The total amount of government debt in the world.

-$56,280,790,000,000 - The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.

-$61,000,000,000,000 - The combined total assets of the 50 largest banks in the world.

-$70,000,000,000,000 - The approximate size of total world GDP.

-$190,000,000,000,000 - The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.

-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.

-$600,000,000,000,000 to $1,500,000,000,000,000 - The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.

Are you starting to get the picture?

Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.

RichardENixon's picture

Wow, that's gonna leave a mark.

EmmittFitzhume's picture

This circus won't end until every short position holder takes it up the ass with Bernanke's fiat papier-mache baseball bat!

Son of Loki's picture

--Zero down loans;

--student loans;

--no-pay for 30 month car loans...


all the same bundle of can only defy the Laws of Gravity for so long with these shenanigans. Unfortuantely, the losses will be passed on to innocent thrid parites who had no hand in the creation of the risks and shared in none of the profit taking. 

Banksters's picture

If the Fed weren't qe'ing to the tune of 85 billion a month, I'm sure that debt demand would pick up the slack.  SNARK.

The Big Ching-aso's picture

Hey man, at least they got a parchment that says a B.A. in Fizz Ed, man.

fonzannoon's picture

they wrote off 3 bil? That is one Pomo day. can't we dedicate one pomo day per quarter to this very serious issue? 

caimen garou's picture

how can that be? the unemployment rate is dropping like lead ballons! comments bernake or your butt buddie krugman! the both of you together don't make a good 3 year old kid

foodstampbarry's picture

This can't be. Just ask Cramer we have a booming economy. 

Fezter's picture

Keep them in brain washing school, drugged up and banging coeds long enough for us to get all the guns and ammo. Then we'll burst the bubble and let them out in the streets to do our bidding.


LawsofPhysics's picture

You want American youth to actually do something?  Good luck with that.

EscapingProgress's picture

Every older generation says the same thing about the younger generation(s). It's getting old.

Soda Popinski's picture

damn.  I missed out on a free Master's degree.

inevitablecollapse's picture

why stop at a master's degree?! i just wrapped up my PhD in Gynecology from the British West Indies Medical College!  in all reality, this is a farce - we have a true skills gap in this country and music and arts degrees are no longer going to cut it along...i would like to see that student debt broken down by program type...

Devils Advocate's picture

$3 bills is meaningless, let me know when it is $30 bills,  Although by than we will be on QE 5 and Ben will be buying up Student loan debt at an annual pace of $10 Bills a month!!  Problem solved

howenlink's picture

I'm not worried!  Putting money for my kids in a 529 College Savings Plan where it is "safe"!


<sarc off>

brettd's picture

Thoughts on how to short this bubble?

Those who saw the sub-prime bubble made a mint....

Why not in this situation?

Devils Advocate's picture

Because there will never be a default!!  Ben wll buy it all up!

Golden_Rule's picture

You gotta be really fucking rich or have the most impeccably lucky timing to play that game.

lolmao500's picture

How can they write it off if you can't get rid of your student loans under bankruptcy law??

MonsterZero's picture

So get this.. the bank who loaned you the money says.. this person isn't going to pay me back.. I'm going to tack on tons and tons of interest and fees... then I'm going to go to the government to get my loan garauntee.  Woo profit... and I'm going to send a 1099-C to this deadbeat and he's going to have to claim all this forgiveness as income on his taxes, haha. (This is part of the handshake/wink between gov. and private bank)

So the deadbeat doesn't really get discharged anything, they simply have to now claim it on their taxes as income... how that turns out is really up to the individual but at the end of the day... average tax payer joe is the one footing the bill to pay the bank their profit... but if you're here I'm sure you already knew this.

sm0k4's picture

Fed loans can't be dissolved in bankruptcy 99% of the time.

Tsar Pointless's picture

Defaulting on student loan debt is unfathomable to me. Do these people not know you can get nearly endless forebearances and deferments on student loans?

Am I missing something here? I have had deferments twice in the past two years. What are these people smoking?

And can I find out, so I don't smoke the same shit?

pacdm's picture

How do get endless forbearances and deferments then?

Tsar Pointless's picture

I assume you meant to ask "How do you" get endless forebearances and deferments.

Easy: If you have loans consolidated through SallieMae, simply go on its web site and apply for either one. Then, supply the necessary documentation, if any, and voila!

It's that easy.

pacdm's picture

what would do,

1 pay the loan which is just as much as the mortgage, and also pay the mortgage, bills, buy food  for a family of 5

2 pay the loan and not the mortgage and feed the family and become homeless no credit and still the loan to pay

3 pay the mortgage and not the loan becoming bankrupt i.e no house no credit

4 pay both till saving are gone then become bankrupt

5 Get the hell out of the usa