We have been vociferous in our discussion of the looming student loan debt debacle (just as we have been over high frequency trading). With credit creation limited to just student (and auto) loans...
in 2013 just student and car loans alone represented 108% (that's right, more than all) of total household debt created.
We thought the following charts would clear up once and for all just how bad the government's heavy visibl ehand of 'help' has been for the average household in America with childrean aiming to pursue the American Dream...
Originally posted at Political Calculations blog,
How much has the average cost of attending college at four-year degree-granting institution in the U.S. risen since the 1969-1970 school year?
For an American student who enrolled in a four-year college in the fall of 1969, the average they paid for their tuition, required fees, room and board totaled $754, which when we adjust for inflation be be in terms of constant 2011 U.S. dollars, works out to be the near modern day equivalent of $4,619.
But a student enrolling in the same kind of institution in the fall of 2011 for the 2011-2012 school year would pay $13,608. Nearly three times as much.
To get a better sense of how affordable, or rather, unaffordable attending college has become, we next calculated the percentage that the average cost of tuition and fees for college would consume of the typical income earned by American households:
In the chart above, we see that after holding basically flat from 1969 through 1982 at a range between 8.6% and 9.0% of the median American household income, the ratio of the cost of attending college with respect to that income began rising rapidly, with the cost of college having reached 26.7% of the American median household income in 2011-2012.
We also see that there would appear to be certain periods where the cost of attending college rose considerably faster than median household incomes, which we've shaded in the chart above.
Let's next look at how the cost of attending college has grown against median household incomes from 1969 through 2012:
Here, we see that there have been three major inflation phases for the cost of college: the first running from 1990 to 1994, the second from 2000 to 2003 and the third from 2007 through at least 2012 (and likely, the present).
We should note that each of these periods coincide with periods of recession or extended underperformance for the U.S. economy. But what is perhaps more remarkable is that we do not observe the same pattern for earlier recessions, the major years for which we've also indicated on this third chart.
That's largely the role of increased government subsidies for higher education after 1989, in the form of grants and guarantees for student loans, which enabled colleges to continue jacking up their prices well above what a typical American household could afford to pay, because now Uncle Sam is increasingly stepping in to pay a growing share of the bill.
Of course, the rise of unaffordability has been juiced by the ready availability of credit to purchase said 'knowledge'... however, as we noted previously... student loans are NOT being used for education...
When one averages out the numbers, how many students are said to abuse their loans and use the proceeds to fund "other" uses? "About a quarter."
Research suggests a fair chunk of that is going to non-education expenses. In 2011-12, about a quarter of student borrowers took out loans that exceeded their tuition, after grants, by $2,500, according to research by Mark Kantrowitz, a higher-education analyst and publisher of the education site Edvisors.com.
And the one take home paragraph that summarizes this latest capital misallocation clusterfuck which has Fed bailout written all over it:
Mr. Selent, of Fort Lauderdale, knows he is getting himself deeper in a hole but prefers that to the alternative of making minimum wage. In his 20s, he earned a bachelor's degree in communications from a local for-profit school but couldn't find a job in the field after graduating and began falling behind on his student-loan bills. He is now taking courses for a degree in theater so he can become an actor.
What else is there to say?
Except that... that free money source comes with a weight problem... delinquencies are soaring...
What's worse, while the 90+ day student debt delinquency rate did post a tiny decline from 11.8% to 11.5% in Q4, on a total notional basis due to the increase in outstanding balances, as of this moment the amount of heavily delinquent student loans has just hit a fresh record high of $124.3 billion, up from $121.5 billion in the prior quarter.