Bubble: Student Loan Delinquencies Surpass Credit Cards
Keep in mind, as I noted yesterday, that these delinquency rates for student loans aren’t telling the whole story. Roughly half of all US student loans are currently in some sort of deferment, meaning that the student loan picture is almost certainly worse than it current looks on paper. In fact, the New York Federal Reserve estimates that absent these deferments and grace periods student loan delinquency rates would be double what they are now.
And, unlike these other sort of loans, because student loans are almost exclusively secured by the government (especially since the Obamacare law essentially nationalized student loans) it’s the taxpayers who are at risk.
Oh, and student loan debt is 42% larger than credit card debt in the United States:
The trouble is, while losses and write-downs of credit-card debt typically fall on banks and private-sector lenders, in the case of student debt, it is largely taxpayer dollars at risk. And the student-debt pile only keeps growing. After first surpassing credit-card debt in mid-2010, the amount of student-loan debt outstanding has quickly surged to become 42 percent larger than the $674 billion of credit-card debt outstanding as of September.
The status quo in higher education needs to change. Sadly, higher ed administrators are making out like bandits. Faculty and administrator pay is through the roof as higher ed budgets bloat. That’s because they get their money up front. When the kids can’t make their loan payments, it’s the kids and the taxpayers who suffer.Tags: higher education bubble, student loans