More Amazing Student Loan Statistics

By Tim on 02/08/2013 in Debt

After looking a little closer at yesterday’s latest Consumer Credit report from the Fed, the growing student loan debt began calling out to be transformed into a chart and I was happy to oblige.

Technically, the “Student Loans” item below is nonrevolving credit held by the Federal Government, but, it’s basically all student loans and it’s been the most important factor in the recent rise in consumer credit.

It’s not really a big surprise to see what happened during the 2008 to 2010 period as the financial crisis led to widespread deleveraging for everyone except for those with student loans, but I was taken aback at how much student loans contributed to the growth in consumer credit over the last two years.

Student loans accounted for 72 percent of the increase in consumer credit in 2012 and, over the last two years, it accounted for 91 percent of the overall increase. Since 2008, student loan debt has increased by $434 billion while all other consumer credit declined by $322 billion. As I said … amazing!

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8 Responses to More Amazing Student Loan Statistics

  1. Jones February 9, 2013 at 1:58 PM #

    That doesn’t look good.

    It looks even worse when you realize that a lot of these student loans are going out to people who have no real hope of repaying the loan because, if they do manage to get a four-year degree, they’ll end up working as a barrista anyway.

    It’s looking more and more like the subprime bubble, only much bigger.

    Reply
    • DCX2 February 12, 2013 at 11:18 AM #

      Yeah, a subprime bubble…but this time with no assets as collateral. You can’t take the education back from someone when they default on the loan.

      About the only good news is that this means the little people will get to benefit from the bailout this time. Students will default, lenders will get bailed out, and students will get to keep their education, unlike when the banks got to foreclose on homes.

      Money says that the government won’t bail out universities when there aren’t enough students attending to make it financially viable for them to operate the way they do right now.

      Reply
      • FreemanDjango February 12, 2013 at 2:03 PM #

        DCX2

        You can’t TAKE the education back but I wonder how many defaulting students would GIVE their diploma back in exchange for cancellation of their debts?

        Reply
    • FreemanDjango February 12, 2013 at 2:02 PM #

      Jones:

      Here’s one way to look at the size of the student loan problem compared to mortgages.

      Student loan debt totals $1 Trillion and is unsecured so the entire amount is subject to loss upon default.
      Mortgage loan debt is about $10 Trillion (10 times) and is secured to about 70% (hard to say for sure) of face for a net exposure to loss of $3 trillion, (or about 3 times that of student loans).
      Mortgage default rates are about 6% or about $180 Billion of loss exposure.
      Student loan default rates are about 10% or $100 Billion loss exposure.
      This is all rough figures but it shows that the student loan default problem is very big in terms of sheer dollars.
      I’m not sure about the ‘trickle down’ impact of the ‘student loan bubble’ bursting. With housing, you had many people impacted since housing touches so many areas. It doesn’t seem that higher education casts as wide a net as housing for that factor.
      Nevertheless, it seems like a VERY big problem over the next decade or so.

      Reply
  2. Tony of CA February 9, 2013 at 3:59 PM #

    Hi Tim,

    Do you think this might end up being a bit deflationary going forward?
    Young, working adults mired in debt, aren’t in the position to spend lavishly.

    Reply
    • Tim February 10, 2013 at 7:26 AM #

      it could be deflationary, but it’s almost certainly a drag on economic growth, one that the Congressional Budget Office surely hasn’t factored in.

      Reply

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