Student Loan Delinquencies Jump As Crisis Spreads

[mfcorey1]

Posted: 08/13/2015 08:32 PM EDT

The share of Americans behind on their student loan payments jumped over the past year despite the improving economy, new data released Thursday show.

About 11.5 percent of outstanding student debt was at least 90 days late or in default as of June 30, up from around 10.9 percent at the same time last year, according to the Federal Reserve Bank of New York. The New York Fed estimates that nearly one in four borrowers whose loans have come due are severely delinquent, or double the published rate, because nearly half of student debt doesn't presently require a monthly payment.

By contrast, the share of total household debt in distress fell to 3.98 percent, New York Fed data show. The figure hasn't been below 4 percent since 2007.

At roughly $136 billion, the total amount of student debt that's severely delinquent or in default is more than all other distressed non-mortgage debt combined, a reversal from last year, New York Fed data show. Non-mortgage debt carried by households includes auto loans, credit cards, home equity lines of credit and other personal loans.

The increase in student debt woe comes despite a growing U.S. economy that's adding jobs and raising workers' wages. Student debt pain also is spreading despite a significant jump in the number of borrowers enrolled in generous government programs that allow them to make payments on their federal student loans based on their earnings, and high-level attention from the White House to fix what President Barack Obama described in 2013 as a "crisis in terms of college affordability and student debt."

The new data is fueling concerns among those outside the student loan industry that student debt will crimp economic growth for years to come as households cut back on spending and investments to service their growing pile of college debt. The New York Fed estimates there's roughly $1.2 trillion in outstanding student debt spread across more than 43 million borrowers. Average debt burdens have nearly doubled over the past decade.

"Some in the student loan industry still believe that things are just fine and dandy. But the reality is that millions of borrowers are needlessly in distress," said Rohit Chopra, formerly the top student loan official at the federal Consumer Financial Protection Bureau.

http://www.huffingtonpost.com/entry/student-loan-delinquencies-jump-as-crisis-spreads_55ccf2ffe4b064d5910ae016?kvcommref=mostpopular

[Javaman]

1. I have long said this is the sleeping giant of bubbles.

3 trillion and counting.

weak job market for graduates with enormous student loan debt, loaned to them by loan sharks equals inability to pay them.

It's coming.

[KansDem]

2. It just dawned on me...

The plutocrats don't want smart citizens. Like George Carlin said, the "owners" want workers who are just smart enough to run the machines and do the paperwork, but not possess critical thinking skills.

What better way than to make college unaffordable for poor and middle-class citizens?

[Javaman]

5. I like to use mcdonalds as the prime example of creating a work force of untrained and

replaceable people.

they have designed their operation to such a degree that it requires the very least amount of training and provides virtually no real world work experience to carry forward.

I consider them probably the most evil corporation primarily for that reason. I can't cheer hard enough nor support the efforts enough of the people trying to Unionize mcdonald's workers.

Read the book "Fast Food Nation" it's brilliant. (and please don't confuse it with the really crappy movie of the same title)

Cheers!

[yeoman6987]

11. They are going automated to

I think within 5 years they will have about 5 workers per store at most. It is going to get ugly big time and not just McD's but all restaurants except 5-star that sell elitism.

[teenagebambam]

4. It's here.

Every decision my husband and I have made for the past 10 years has been directed by those loan payments. It will be a long time, if ever, until we're active contributors to the economy.

[Javaman]

7. This is what breaks my heart.

I paid for my college out of my pocket. Granted I went to a community college and a state school, but even then I was able to pay it via a part time job.

I honestly don't know how people today do it with the grifting banks and student loan sharks.

Education should never ever be a for profit endeavor for the banks.

[davidpdx]

10. Last figure I heard was 1.2 billion, but that is an old number

I would guess we'll hit 2 billion fairly quickly. I don't think it's that high yet.

Yes, there is going to be a bubble at some point. The question is what will be done and will it be done before the bubble bursts.

[Amishman]

3. The income driven replayment plans are a trap

It just lets lenders stretch out the loan and rake in more interest.

[TBF]

6. The rates are too damned high -

(with apologies to Jimmy McMillan)

My husband and I are professional class. We were from modest backgrounds and were able to get through undergraduate studies with no more than $15K in debt - but grad school was more expensive for both of us. We did some extensions when starting out and then graduated repayment. But we can't seem to pay as fast as the interest compounds. It really is a trap.

The one thing I'd like to see Bernie do is cut our interest rates. The big banks were massively bailed out and the corporations are being given big subsidies. I think it's time for a mini-bailout for us as well. We have no argument for not repaying the loans at our salary level (ie we are not looking to have them erased), but to be forever in the hole is ridiculous.

And this is one of the main reasons I support Bernie. I think he really gets it.

[Igel]

8. Foolish reporter.

Distressed household debt--cars, house loans, etc.--can be liquidated.

Creditor side actions include repossessing the car. You can foreclose on the house. There you go, a lot of the issue solved.

Borrower-side actions include bankruptcy. You have the debt wiped out. Or you can pay or refinance.

Wham. The amount of total distressed household debt can be reduced. After a recession, you rather expect that to happen as the years drag on. Bankruptcy backloads are cleared, legal challenges to foreclosures are dealt with, and with increased income the legal efforts to resolve back debt squeeze money out of people or result in bankruptcy. (Let's not forget that people die and that also handles some of the debt.)

But student loans backed by the government are forever. You can't repo that degree. You can't foreclose on a diploma. Bankruptcy law bounces off the super-duper teflon (tm) coating. You either pay or refinance or die.

The government doesn't do a whole lot to collect. All the horror stories notwithstanding, it's political toxic waste to be seen as legally pursuing a lot of unemployed or underemployed young college grads whose only fault was taking out $160k at a top-tier school for that 8-year master's in the history of representations of martial arts in spaghetti westerns as a reflection of the oppression of indigenous peoples in SW Amazonas state in the period 1971-1972.

The only way to get that student loan figure down--ever--is to get former students to pay up or refinance. The fall-back is to change the law to allow bankruptcy to absolve the debt or write it down. Any story that leaves this out is just another of the feel-bad-to-feel-good stories that so many love to read. One of those "power outage" stories, showing our lack of power, but which do little but lead to "our poutage."

[davidpdx]

9. Well put

The change in bankruptcy law in 2003 was a bad idea. Donald Trump can declare bankruptcy for his company three times, but as a consumer we are screwed for student loans.