Federal Student Loans Surpass $1 Trillion; Delinquency Rate Soars To All Time High

Tyler Durden's picture




 

There is a reason why US consumer revolving (credit card) credit growth is getting lower and lower and lower and at last check posted a mere 0.2% annual increase.

That reason is that as the NY Fed disclosed moments ago, federal student loans officially crossed the $1 trillion level for the first time ever. Notably: the quarterly student loan balance has increased every quarter without fail for the past 10 years!

And just to prove that while credit card balances are plunging due to more stringent bank repayment requirements, this is more than offset by borrowers shifting to student loans, where the delinquency rate on student loans is soaring and has just hit an all time high of 11.83%, an increase of almost 1% compared to last quarter. Even according to just the government lax definition of delinquency, a whopping $120 billion in student loans will be discharged. Thank you Uncle Sam for your epically lax lending standards in a world in
which it is increasingly becoming probably that up to all of the loans will end up in deliquency.

Full report here

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Thu, 11/14/2013 - 14:31 | 4154925 Kickaha
Kickaha's picture

OK, I'll say it again. 

Make the institution sign as guarantor of the student before issuing any student loans.  Because it is the school, not the student, who ends up with the money, it is only fair for them to guarantee the loan.

There, a one trillion dollar problem solved, or, perhaps more accurately, a soon-to-be several trillion dollar problem held to one trillion.

 

Thu, 11/14/2013 - 14:34 | 4154936 Say What Again
Say What Again's picture

Want an education?   Take that money from your student loan and buy a bunch of SPY & QQQ.

Thu, 11/14/2013 - 14:35 | 4154944 tsx500
tsx500's picture

and BTC

 

Thu, 11/14/2013 - 14:43 | 4154951 Say What Again
Say What Again's picture

PCLN too

What can possibly go wrong

 

Thu, 11/14/2013 - 15:21 | 4155134 onewayticket2
onewayticket2's picture

not only is SoFi accelerating their demise, but individuals are now writing their own loans to get yield....but only on the best, most creditworthy students.

 

TIMMMMBERRRRRRRRRRRR

Thu, 11/14/2013 - 15:59 | 4155286 jbvtme
jbvtme's picture

go to edX.org and take courses from mit and harvard.  it's free.

Thu, 11/14/2013 - 19:14 | 4155868 Tijuana Donkey Show
Tijuana Donkey Show's picture

But corporate America holds out, they want debt serfs who need to make payments on degrees. People without debt quit or leave when things get shitty. 

Thu, 11/14/2013 - 19:36 | 4155942 The Alarmist
The Alarmist's picture

This is how leftist politicians reward their loyal supporters in academia with the help of the money of decent middle-of-the-road Americans like yourselves.  You, of course, are expected to feel good because you were only trying to achieve the best future for your offspring while you helped sell them into slavery.

Thu, 11/14/2013 - 21:56 | 4156378 bunzbunzbunz
bunzbunzbunz's picture

i would have been a billionaire... :(

Thu, 11/14/2013 - 14:34 | 4154937 tsx500
tsx500's picture

this is all part of the 'great recovery' , right ?     forward ?  

Thu, 11/14/2013 - 14:40 | 4154956 jcaz
jcaz's picture

You think the school winds up with this money?   What do you think has been powering consumers for the last five years? 

Ah, Serfdom- hope you kids enjoy your Ipads.....

Thu, 11/14/2013 - 14:45 | 4154974 Surging Chaos
Surging Chaos's picture

The schools are definitely the ones that end up with the money. How else can they pay for multi-million dollar athletic budgets, luxurious new buildings, and seven-figure salaries for bureaucrats?

Thu, 11/14/2013 - 16:32 | 4155395 ATM
ATM's picture

I was just commenting to someone that all the construction I have seen going on across the country is either some educational institution or a hospital.

These are your bubbles.

Thu, 11/14/2013 - 16:51 | 4155462 Troll Magnet
Troll Magnet's picture

And prisons.  Lots and lots of prisons.

Thu, 11/14/2013 - 16:55 | 4155475 shitco.in
shitco.in's picture

And a lot of these tax free bond funds are holding the bonds that were sold to build these dorms.  They are ALL over the place just waiting to implode.

Example:

https://www.nuveen.com/cef/Product/Holdings.aspx?fundcode=NRK

Thu, 11/14/2013 - 15:10 | 4155097 Kickaha
Kickaha's picture

As for the students themselves:

Once a student receives his federal student loan award, the U.S. Department of Education sends the money directly to his school. The school will then apply the funds to his account for the cost of tuition, room and board, school administration related fees and class activity fees, such as lab fees. If the loan funds arrive after the beginning of the semester, the financial aid office will issue him a book voucher or credit to buy books and deduct this amount from his student loan proceeds once they arrive. The school then refunds any remaining loan proceeds to the student. There are no restrictions as to how he spends the money refunded to him from his student loans.

Read more: http://www.ehow.com/info_8109751_do-student-loans-come-restrictions.html#ixzz2keFB0kTP

 

Parents can apply for and receive Plus loans supposedly to help them put their kids through college, and there are little, if any, restrictions on those suckers.  So, the student and the parent can conspire to get a Plus loan and live off of that, and the student apparently gets the leftovers from the school.  Rather than boring people with the details, let's just say the schools are fully taken care of by these programs, and sometimes the kids and their parents, too.

The program "powers" the universities and makes the current expense bubble in college costs inevitable.

Fri, 11/15/2013 - 00:21 | 4156762 MopWater
MopWater's picture

Thats the exact situation my wife is in.  Took out loans to pay for education, took extra for the "disbursment" and lived on loans for 4 years or so.  That idea was common place and was actually promoted by the schools and their "financial advisors".

I cant tell you how many kids used that extra cash to go on spring break trips, buy gadgets, or just party...im only a few years removed so it couldnt have changed much.

Thu, 11/14/2013 - 15:08 | 4155083 BlueCheeseBandit
BlueCheeseBandit's picture

Totally agree that the schools should be on the hook for this money. They're the only ones benefitting from this system. Odious debt.

But the head nigger in charge won't reform this system unless it collapses on his watch. He's too busy picking the cotton for his Massas: fat old bitches with crusty cunts and no skills milking the education scam for all it's worth, kids be damned.

Thu, 11/14/2013 - 19:32 | 4155932 CH1
CH1's picture

Take the skin color shit elsewhere.

Thu, 11/14/2013 - 21:55 | 4156376 acetinker
acetinker's picture

Agree, but the particular kneegrow referenced is a pox on free humanity.

Thu, 11/14/2013 - 15:25 | 4155150 rubiconsolutions
rubiconsolutions's picture

We've had the ACA (Affordable Care Act), maybe it's time for the SNAFU (Students Not Actually Fucking Us) to get them off the taxpayers teat.

Thu, 11/14/2013 - 15:36 | 4155182 HardAssets
HardAssets's picture

Sue the institutions for breach of contract for the loan sums. They were supposed to provide an education, turned out tons of naive dummies - so obviously education wasn't provided.

Thu, 11/14/2013 - 16:52 | 4155463 libertus
libertus's picture

Nothing says collapse like numbers that large. Check our Oplerno.com they have a good model that lowers cost and actually creates an incentive to pay teachers more while lowering the cost. Its called a marketplace...

This is not going to end well for traditional higher education. It is over for all those tenured professors and high paid administrators. 

Thu, 11/14/2013 - 20:31 | 4156102 Ghostdog
Ghostdog's picture

Love the idea! Too bad the University dildo's wont

Fri, 11/15/2013 - 09:42 | 4157348 papaclop
papaclop's picture

Why does dildos get an apostrophe?

Thu, 11/14/2013 - 14:32 | 4154927 Lin S
Lin S's picture

Student loan bailouts will be next and unemployable Art History majors will cheer for the Emperor who thinks it up.

Thu, 11/14/2013 - 14:49 | 4154998 Groundhog Day
Groundhog Day's picture

My young naive cousin attends Seton Hall.  She gets a new laptop every two years and she thinks it's free. 

Thu, 11/14/2013 - 15:04 | 4155069 Lin S
Lin S's picture

Wow... just wow.  I wonder how many more like her are out there...  = (

Thu, 11/14/2013 - 23:13 | 4156587 jerry_theking_lawler
jerry_theking_lawler's picture

all of them

Thu, 11/14/2013 - 16:10 | 4155218 HardAssets
HardAssets's picture

I heard of a kid who uses his student loan money to buy $1500 ukuleles. One of them needed some work done on it, so he sent it to the maker. He bought another one to play around with while the first one was in the shop for a couple weeks. (He is not a professional muscian using the instrument to make a living in any way. )  After he got the first one back from the shop, he sold the 'spare' for $750 - - - a 50% loss in two weeks.

Wanna bet that the taxpayer will be somehow hit with at least part of the bill on that $1Trillion of loans ?  The banks never take the hit.

Thu, 11/14/2013 - 16:56 | 4155466 Troll Magnet
Troll Magnet's picture

Yeah but ukulele is a human right.

Thu, 11/14/2013 - 19:47 | 4155966 americanreality
americanreality's picture

Every two years?  How long has she been in school?  Sounds made up. 

Thu, 11/14/2013 - 15:08 | 4155070 Josey Whales
Josey Whales's picture

I have to admit, I'm part of that 11% default rate. Am I proud of it? No. Am I proud I got an overpriced Politcal Science degree? Not at all. Did I know any better as a fresh 18 year old teenager--lead and funneled to college to "further my prospective future?" No, I had no idea.

This is the most dangerous type of loan--overambitious teenagers ready to flee the nest and start fresh on their vision of the life--filled with nonsensical ambitions like "I'll graduate college and get a job as a "x" getting paid $xxx,xxx/year."  Hey kid, don't have money? That's okay, just sign here. Here hits the climax of the story--We witness the dreams of the college graduate sink down the pisser as the only available work for the carbon copy college graduate is as a barista at Starbucks, whipping up Pumpkin Spice lattes to sorority girls sporting 3XL frat shirts and yoga pants tucked into Ugg boots.

Reminds me of that terrible Nicholas cage movie "Ghost Rider". The devil tells Cage--"Just sign here" (Cage cuts his finger and a drop of blood hits the dotted line). "Oh, that'll do just fine".

Thu, 11/14/2013 - 15:32 | 4155175 Alpha Monkey
Alpha Monkey's picture

This is pretty much the same reason I'm against recruiting for the military in High Schools and Colleges.  Personally, I think it is equally criminal sign up youngins to "defend the country".

Thu, 11/14/2013 - 16:21 | 4155358 Josey Whales
Josey Whales's picture

Thank God I didn't follow that route--"Use your vigor and your young, narrowminded attraction to violence to defend yer country against dem people who hate us for our FREEDUMZ!"

Sadly enough though, I thought I wanted to graduate college to become an officer to "sacrafice for my country". How shitty would that have been? Got to college, get in debt, serve your country, die/become injured/obtain PTSD? I would have been the poster boy for the state.

Thu, 11/14/2013 - 15:35 | 4155179 codecode
codecode's picture

So, what actually happens when one defaults on a student loan? I know bankruptcy is not an option... Does the IRS come a knockin? Or do you just keep getting statements from the government the rest of your life?

Thu, 11/14/2013 - 16:02 | 4155301 Kickaha
Kickaha's picture

They officially default you, then you get stern letters and dunning calls, then you get suggestions as to how you can apply for various abatement programs (i.e - payments are suspended or lowered and you fall into negative amoritization), then the file is turned over to a collection agent, and eventually they have the right to sue your ass.  There is no defense, so they obtain a Judgment. After that, they can use Court writs to seize your assets and garnish your wages.

If you have a thick skin, no assets, and no job, you've got nothing to worry about, at least with regard to your student loan debt.

If the loan is federally guaranteed, they will seize your Social Security benefits, but if you are under 40 right now, you probably won't have to worry about that, either.

Thu, 11/14/2013 - 17:00 | 4155481 MachoMan
MachoMan's picture

A landmine for families moving forward...  one spouse has debt, the other doesn't...  have to separate all their assets and use impractical maneuvers to avoid creditors...

Thu, 11/14/2013 - 18:49 | 4155785 Edelweiss
Edelweiss's picture

I see that sort of situation on a regular basis at work.  One woman I know is about to marry a guy with a newly acquired PHd in chemistry, and 100k in debt.  Did I mention he makes $10/hr as a part-time worker, and is unable to find a job in his chosen (teaching) area?  Bright enough to earn a PHd, but too dumb to realize paying off that kind of debt is a monumental task when also trying to start a family, buy a house, etc. 

Thu, 11/14/2013 - 19:21 | 4155895 Tijuana Donkey Show
Tijuana Donkey Show's picture

Two words. Breaking Bad

Thu, 11/14/2013 - 23:16 | 4156594 jerry_theking_lawler
jerry_theking_lawler's picture

another word. tell the woman to get wise. find another lover with no debt and $10/hr job.

Thu, 11/14/2013 - 17:09 | 4155533 codecode
codecode's picture

Serious stuff... tough future for those involved

Thu, 11/14/2013 - 15:39 | 4155195 NOTaREALmerican
NOTaREALmerican's picture

Re:  overambitious teenagers ready to flee the nest and start fresh on their vision of the life

Adults screwing the children.   The adults kill the children in the sand box for oil,  get them into debt, demand they pay for the OldFart's free Medicare Motorscooters, & fill them with bullshit that all the children are above average.

Of course, each generation matures into adults doing the same thing.   Interesting society we have here.   

Thu, 11/14/2013 - 16:24 | 4155376 JuliaS
JuliaS's picture

Our old geezers are gonna compete with foreign geezers over the dwindling supplies of diapers and dentures. There'll be wars over this shit and who's better to send defending the turf than the young crop of indebted volunteers armed to the teeth with hi-tech gadgets.

Thu, 11/14/2013 - 16:01 | 4155293 RockyRacoon
RockyRacoon's picture

Politcal Science

We presume that you learned the definition of "oxymoron" while in attendance at your educational institution?

Thu, 11/14/2013 - 16:11 | 4155321 Josey Whales
Josey Whales's picture

Actually, I learned how to chug a beer and socialize--none of which should have cost me 18k in the hole. But yes, I see how "politcal" and "science" can be interpreted as a oxymoron

Thu, 11/14/2013 - 16:25 | 4155372 HardAssets
HardAssets's picture

Josey Whales - Well what gets to me is how freakin' clueless parents seem to be. Its understandable that many 18 year old kids have no idea what end is up . . . but their parents seem to be in the same boat. No guidance of their kids in terms of the options out there for them ?  A relative's kid will graduate from h.s. and wants to go into the medical field. Really ?  Ever heard of obummer 'care' ?  Are they aware that experienced docs are leaving the field because of the nightmares they see coming ?  Are they aware that they WILL need to get BIG loans if the kid makes it into medical or dental school ? (The odds are very slim for that)  Do they know that a pre-med (typically biology based) undergrad degree is worth very little ?

I guess kids need a 'tell it like it is uncle' to tell them when their head is stuck up their backside. The parents seem to be stuck in 'positive thinking' kum-baya mode, or something.

Thu, 11/14/2013 - 16:38 | 4155419 Josey Whales
Josey Whales's picture

@Hard assets--I agree. The flip side is my generation is starting to wake up. College enrollment is steadily decreasing, and college institutions are wrongly diagnosing the problem to "marketing failures". Hardly. People are just realizing "why the hell should I spend a lifetime of debt for a degree that will more than likely not even get me a job even related to my field?"

i like Schiff's take on the situation. his advice--graduate HS, live with your parents for 4 years and offer your services to a company of your chosing. Tell them "I'm willing to work for you at minimum wage and become trianed for over the years for x job." Within 4 years it would have taken the most studious of college grads to graduate, you've gained applicable skills, you've avoided copious amounts of debt, you've saved money by not paying rent, and saved cash from your job-- all the while possibly climbing the ladder. Within 4 years, you can have skills outmatched the college grad they can't compete with.

That's one alternative. Another? travel the world. Start up a makeshift business. Fail. Succeed. Do shit other college kids do--without going to college. We act like college is the only option, and it isn't.

Thu, 11/14/2013 - 16:53 | 4155454 HardAssets
HardAssets's picture

Josey Whales:  The worst part of it is that you just about cannot get a real classical liberal education in the 'schools' today. They are places for dumbing people down and indoctrination. A classsical education used to be common across America, but is only taught in private prep schools attended by the children of the so-called 'elites' today. Such an education includes the tools for learning how to learn which are part of the Trivium and include General Grammar (English grammar is only a small sub-set of that), Logic, and Rhetoric. Even those going into technical specialites only apply critical thinking skills to their narrow vocational specialties. So, its very common to find doctors, engineers, and scientists who are as dumb about the world as the general population, and easily fooled by propaganda. (Such as obummer voters in high tech industry regions.)

And the thing is, this classical education can be had by anyone who puts in the effort for themselves. You can do it on your own for little (or no) money.

If a kid & his parents spend big bucks today, they should insure that it will enable tihe kid to make a living and become independent.  Real education is an entirely different thing that you do for yourself over a lifetiime.

Best regards to you

Thu, 11/14/2013 - 17:22 | 4155568 scrappy
scrappy's picture

I am very glad you mentioned the Trivium.

http://www.triviumeducation.com/

The Quadrivium

http://www.triviumeducation.com/quadrivium-2/

[4] Arithmetic, [5] Geometry, [6] Music, and [7] Astronomy.

The Quadrivium (which pertains to Matter & Quantity)- the advanced four.

[4] ARITHMETIC —
Number in itself, which is a pure abstraction; that is, outside of space and time.

[5] GEOMETRY —
Number in space.

[6] MUSIC OR HARMONIC THEORY —
Number in time.

[7] ASTRONOMY —
Number in space and time.
a. Number
b. Geometry
c. Harmonics
d. Cosmology

Here are some books on my wish list ...

The Trivium

http://www.amazon.com/gp/product/0967967503/ref=ox_sc_sfl_title_2?ie=UTF...

The Quadrivium

http://www.amazon.com/gp/product/0802778135/ref=ox_sc_sfl_title_10?ie=UT...

Sciencia: Mathematics, Physics, Chemistry, Biology, and Astronomy for All

http://www.amazon.com/gp/product/0802778992/ref=ox_sc_sfl_title_1?ie=UTF...

Sacred Geometry

http://www.amazon.com/gp/product/1402765827/ref=ox_sc_sfl_title_9?ie=UTF...

 

 

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