Zero Hedge — Household Debt Rises By $572 Billion, Ends 2017 At All Time High

Zero Hedge

Household Debt Rises By $572 Billion, Ends 2017 At All Time High

Tyler Durden

Zero Hedge — Consumer Credit Has Second Biggest Jump On Record, As Student And Car Loans Soar

It will likely not come as a big surprise that at a time when US personal savings are once again declining, perhaps as a result of soaring health insurance costs, that US consumers are forced to borrow increasingly more to make ends meet. And, as expected, the latest consumer credit report confirmed this, when moments ago the Federal Reserve announced that in August, total US credit surged by $25.9 billion on a seasonally adjusted basis, smashing expectations of a $16.5 billion increase, and the third biggest monthly jump since 2001.

Zero Hedge
Consumer Credit Has Second Biggest Jump On Record, As Student And Car Loans Soar
Submitted by Tyler Durden

The Apocolypse Is Within Sight - Garnish Social Security Benefits To Pay For Student Loans

   (Commentary posted by Roger Erickson.)

Why we shouldn’t garnish Social Security benefits to pay for student loans

Culture-sucking parasites? You don't say?

Worse, combatants on both sides of this faux argument don't know what they're talking about. It's embarrassing. A debate between Outright Frauds and Innocent Frauds. What could go wrong? The awesome display of urbanity leaves one speechless.

Can't believe we're watching this conversation - featuring these amateur spokespeople? Believe it lady! This culture-sucking behavior immediately conjured the memory of tongue-eating parasites.  Is there no limit to what we harbor within our own array of policy advocates?

John T. Harvey — Student Loan Debt Crisis?

But, despite it’s search-engine popularity and the associated journalistic sensationalism, it’s not at all evident that we are witnessing the development of another speculative bubble. In fact, once you break down the facts, it turns out that the parallels are relatively few. That said, however, student debt loads are a problem, and a serious one. Not only do they create a significant drag on short-term economic activity, but they will stunt our long-term growth as well. And the situation is deteriorating. The disease is real, it’s just more subtle and insidious than a financial market boom and bust.

Forbes — Pragmatic Economics
Student Loan Debt Crisis?
John T. Harvey | Professor of Economics at Texas Christian University

Liberty Street — Just Released: Who’s Borrowing Now? The Young and the Riskless!

Yep, student loans again.

FRBNY — Liberty Street Economics
Just Released: Who’s Borrowing Now? The Young and the Riskless!
Andrew Haughwout, Donghoon Lee, Wilbert van der Klaauw, and David Yun

See also FRBNY, Household Debt and Credit Report - Q3, 2013

Insane policy: Fed'l gov't makes a $41 billion profit on student loans

Question: What kind of government seeks to make a profit on money that it can issue freely and without limit and when doing so serves no public purpose?

Answer: The U.S. government, on the belief that it has no dollars and must, therefore, engage in profit seeking enterprise.

While some folks may be cheering this (maybe even some of our "leadership"), the fact of the matter is, it's categorically insane.

First off, those are profits that could have been earned by the private sector and, secondly, what good does it do to load your citizenry up on debt when the economy is not creating the jobs needed to pay those loans back?

There is no greater asset to any nation than a well educated citizenry, but apparently the powers that be, believe otherwise. They believe profits--in U.S. dollars--are more important.

DID ANYONE TELL THESE GENIUSES THAT THE GOVERNMENT CAN ISSUE DOLLARS WITHOUT LIMIT AND VIRTUALLY AT ZERO COST??

Total, fucking idiocy.

Who needs the banks? It's Gov't that does most of the lending now.

A few days ago JP Morgan announced that it was going to stop making student loans. Great, who needs them?

Since the crisis the banks have been largely irrelevant when it comes to lending. Bank credit has only really grown with respect to auto financing, however, real estate, student loans, it's been all government.

Take a look at this chart. It's a chart of the dollar volume of student loans being made by the Federal Government. We don't need the banks with the government lending like this.

The crisis has exposed one glaring fact...that the banks are good at one thing and one thing only and that is gambling in the markets and losing money. (Then extorting us to pay them back for their losses.)

Oh yeah, if they make money (and it happens from time to time) it's only because their bets are rigged, like with Libor, which is nothing more than outright thievery. (And the Fed does nothing.) Oh yeah...and fees.

I don't know how many of you have had this experience recently: go into your local bank...they are so courteous and nice and friendly, right? But you just know they're screwing you in some other way.

Anyway, check out JP Morgan's financial statements. The nation's largest bank makes a paltry 1.0% return on assets. Great job, Jamie Dimon! You're a true, Master of the Universe!

And by the way, the only reason it even makes that ridiculous 1.0% is because the U.S. government--WE THE PEOPLE!--pay it welfare in that amount. That's right...interest on our own, freakin' money that we create without limit.

The poor get nothing, but we give $30 billion to JP Morgan. America...what a country!

Shahien Nasiripour — Obama Student Loan Policy Reaping $51 Billion Profit

The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation's most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.

The Huffington Post
Obama Student Loan Policy Reaping $51 Billion Profit
Shahien Nasiripour

Mike Konczal — Are Student Loans Becoming a Macroeconomic Issue?

If you asked economists looking at the data if student loans could be having a macroeconomic effect, especially through a financial burden on those that have them, they'd say that the actual percent of monthly income paying student loans hasn't changed all that much since the 1990s. They may be making larger lifetime payments, since they'll carry the debts longer, but that's a choice they are making, which could reflect positive or negative developments. Certaintly there's no short-term strain. So there aren't any economic consequences worth mentioning when it comes to student loans.

I always thought this approach had problems....

Truthout | News Analysis
Are Student Loans Becoming a Macroeconomic Issue?
Mike Konczal, Next New Deal

Robert Oak — The Student Loan Money Machine

Going to college these days amounts to sinking oneself into a lifetime of massive debt. A new studentadvocacy report spells out some damning facts. Did you know the federal government is slated to make a whopping $34 billion in 2014 off of student loans? Meanwhile other reports are showing student debt is keeping people from obtaining credit, buying a home and moving on with their lives.

According to the New York Fed, student loan debt has tripled over the last eight years to a whopping $966 billion in by the end of 2012. That is a 70% increase in borrowers and a 70% increase in debt held by each. Student loan debt is now the largest consumer debt, second only to residential mortgages and one of the reasons is student debt is not discharged through bankruptcy.

The Economic Populist
The Student Loan Money Machine
Robert Oak

Natasha Lennard — Student Debt Tripled in Eight Years

A new report from the New York Federal Reserve further confirms what many commentators have been long saying — student debt is the bubble that just keeps expanding. Total student debt has nearly tripled in the past three years.

Total student debt stands at $966 billion as of the end of 2012, with a 70 percent increase in both the number of borrowers and the average balance per person. The overall number of borrowers past due on their student loan payments has also grown, from under 10 percent in 2004 to 17 percent in 2012.

Being debt to the government, student loans cannot be discharged in bankruptcy. Moreover, student debt is already having knock on effects as the new mortgage, cutting into home ownership.

AlterNet
Student Debt Tripled in Eight Years
Natasha Lennard | Salon

Catherine New — Consumer Financial Protection Bureau Finds Student, Mortgage Lenders Have 'Uncanny Resemblance'

The private student loan industry smells a lot like the subprime mortgage industry: Dead ends, runarounds and few live customer service representatives to speak with. The same tactics that mortgage borrowers have faced are now happening for student loan borrowers, according to a new report from the Consumer Financial Protection Bureau.

The government watchdog on Tuesday released its annual report on student loans, including details from a database of complaints that opened to student loan borrowers in March.
“Student loan borrower stories of detours and dead ends with their servicers bear an uncanny resemblance to problematic practices uncovered in the mortgage servicing business,” CFPB student loan ombudsman Rohit Chopra said in a statement.

The Huffington Post
Consumer Financial Protection Bureau Finds Student, Mortgage Lenders Have 'Uncanny Resemblance'
Catherine New

Zero Hedge — The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default

And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.

Zero Hedge
The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default
Submitted by Tyler Durden

These loans are federally guaranteed so wait for another bailout. 

These loans can not be discharged in bankruptcy, so many students are going to be living with the consequences for a long time, likely including wage garnishment if they ever do get a job.

It's a debacle that will impoverish a significant portion of the generation.

Robert Oak — Student Loan Debt Time Bomb

Student loan debt is now the next great bubble, threatening the U.S. economy as the mortgage crisis did. The NACBA [National Association of Consumer Bankruptcy Attorneys] released a study and calls student loan debt the next financial crisis, on the level of the mortgage crisis.

Read it The Economic Populist
Student Loan Debt Time Bomb
Robert Oak

Another rent bomb ticking. Who needs terrorists when we are hell-bent on blowing ourselves up.

Yves Smith — The Burgeoning Student Debt Problem

Even though other consumer debt-bombs have done more damage, student debt is producing significant social and economic distortions. One is so useful to the authority structure that it seems certain that they will keep this type of bondage in place. Heavy debt loads pressure young people into making conservative choices. If you carry a lot in the way of student loans, you have to worry about employability. That doesn’t simply push graduates into bigger ticket (hence more conventional) career choices; more important, it makes them far less likely to step out of line. In particular, an arrest record, which is often a by product of protesting, is an automatic out with a lot of employers.

But the level of student debt, now estimated at over $1 trillion outstanding, is having an impact on spending. First time home buying is running below the level expected given new household formation, and a big culprit is student debt loads, since many young people are too leveraged to take on a decent-sized mortgage on top of their existing obligations. In addition, the 25 to 39 year old cohort is the top target of advertisers, but the more debt service they have, the less they can buy in the way of goodies.

Read the rest at Naked Capitalism
The Burgeoning Student Debt Problem

by Yves Smith

The next debt bomb? Even if not, it is structurally altering the economy in a way that postpones demand for major economic drivers like housing. The housing recovery is already weak; in fact, the bottom is not yet in. Dr. Housing Bubble, for example, has been warning about student debt as a drag on the housing recovery and one that is likely to persist until some solution is implemented.

Wolf Richter — Next: Bankruptcy For A Whole Generation

Wolf Richter looks at higher education tuition increases, and student loans and concludes that this trend is unsustainable.

Read it at Testosterone Pit
Next: Bankruptcy For A Whole Generation

by Wolf Richter

(h/t Zero Hedge)

Fed Study of Student Debt Outlines a Growing Burden

Read it at The New York Times
Fed Study of Student Debt Outlines a Growing Burden
by Andrew Martin and Ron Lieber
(h/t Mark Thoma)

Dr. Housing Bubble — The brewing bubble in higher education

There is high-quality evidence suggesting that higher education is deep in a bubble.  When I examine the weakness in the housing market I also think of the massive expansion of debt with student loans.  The biggest expansion in student debt occurred in a decade where household incomes stalled out.  Many of the recent graduates are struggling to find good paying work so it has become much tougher for these young professionals to purchase homes.  It becomes even more difficult if they live in a state like California where housing is still showing hints of a bubble in many markets.  I get e-mails from young families looking to buy but their incomes simply cannot afford prices in mid-tier markets, at least where prices stand today.  They are saddled with debt not seen in previous generations and they are more reluctant to jump into a massive mortgage payment.  There is little sign that the bubble in higher education is slowing down and we have some new perspectives on the data.

Read it at Dr. Housing Bubble
The brewing bubble in higher education – in 2000 student debt made up 3 percent of all household debt. Today it has doubled to 7.5 percent and has grown by 511 percent in the last decade.

by Dr. Housing Bubble

The Next Crisis — Student Loans

In October 2011, the White House announced, “Currently, more than 36 million Americans have federal student loan debt.” By the end of 2011, student loan debt had exceeded $1 trillion. Two-thirds of college seniors graduate with student loans, including over 62 percent of public university graduates. According to the Project on Student Loan Debt, they carried an average of $25,250 in debt in 2010, but many have far greater debt than that average. And nowadays, with high unemployment, even higher underemployment, the inability to pay bills, and accumulating interest and penalties, the lives of student loan debtors can quickly turn into financial nightmares.  

"Indentured Servitude? I’ll be paying for my student loans for the rest of my life....A large portion of my earnings goes to the Wall Street elites that have commoditized and securitized my loans....I knew at the time I signed the student loans (again and again) that I would be responsible...what I didn’t figure was the cost to my children." —Jeff Vincent, AlterNet 

[emphasis added]

Read it at AlterNet
Will the Young Rise Up and Fight Their Indentured Servitude to the Student Loan Industry?

by Bruce E. Levine

Dr. Housing Bubble —The twin bubbles of housing and higher education

The twin bubbles of housing and higher education – housing bubble expanded from 1997 to 2007 and imploded. Since 2000 tuition costs have been soaring but graduate pay has been falling. What happens when you price out a generation looking for starter homes?

This post is a shocker if you are not up on the numbers. Looks ominous.

Financialization is spreading to all areas from which rent can be extracted. With incomes stagnant or falling and debt burden increasing, what can the next generation hope for and how is this going to effect the economy?