For all the talk of deleveraging, American consumer debt remains extremely high by historical standards. Some say it’s because we lack self-control. It’s undeniable that as wages have stagnated, households have been forced deeper in debt to maintain their important role as “consumers” in a consumption-driven economy. At the end of the fourth quarter, consumer debt totaled $11.8 trillion, up $117 billion.
One area getting particularly worse is student loans.
According to a report today from the New York Fed, student loan delinquencies are the one form of consumer debt that hasn’t shown at least some improvement since the Great Recession. In fact, student debt overdue 90 days or more has increased:
The report says:
Student debt is not dischargeable in bankruptcy like other types of debt; thus, delinquent or defaulted student loans can stagnate on borrowers’ credit reports, creating an ever-increasing pool of delinquent debt.
The New York Fed promises to investigate the phenomenon further this week on its Liberty Street Economics blog. But I can add four elements now:
- Young graduates out of college aren’t being paid as well as they were in the 1990s and before.
- Tuition has shot up as state support for universities has fallen (and in some cases, Tiffany programs have been added, increasing the cost of an education if not always its quality).
- As the recession destroyed (or “disrupted”) entire professions and skillsets, people went back to school, desperate to gain the training for new jobs.
- The growth of the “for-profit education sector” which pushes federal loans on students and yet often has poor graduation rates.
Total student debt is now $1.16 trillion. The chart below, somewhat trailing, shows the federal portion and how this gigantic sum is a recent phenomenon:
I was able to work my way through college with federal grants, a scholarship and a small loan. The latter was paid off within a year because I got a well-paid job. That would be much less possible now.
Today’s Econ Haiku:
On the waterfront
Longshoremen and terminals
United to sink