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from the I-owe,-I-owe,-it's-off-to-work-I-go dept.
Another day, another record broken.
The debt held by US households has surpassed its pre-2008 record, several financial outlets note. A peculiar spotlight in the associated numbers falls on student loans, where delinquencies are multiple times higher than for other debt types: 10 percent is the norm.
That's some pretty troubling news for the economy [and wider society], notes Rana Foroohar at sister outlet the Financial Times. First off, there's the association between the rise in student debt, and a decrease in home ownership for young people. This connection is exacerbated by them millennials increasingly turning towards income-based repayment programmes, which spread out the debt over more years.
Secondly, the level of student debt delinquencies ain't changing: the 10 percent figure is a near-constant over the past 4-5 years. People who've ever had a delinquency -- even if they recover -- have a much lower rate of home ownership at age 30 as compared to their non-defaulted compatriots. Not having a home means not filling it with stuff, and filling with stuff is kinda what the economy is based on.
Then, thirdly, it's not only students that are hit by student debt: increasingly, their parents are taking on debt too, to help out. Fuel for that debt sandwich is something peculiar: the rate of inflation in college admission costs is three times higher than the consumer price index. Must be that college professors wages have increased a lot, then.
Given that boomers and their millennial offspring are the two largest voting blocks in the US, a snappy future president-elect might consider raising the issue a bit.
(Score: 4, Informative) by c0lo on Thursday May 18 2017, @10:08PM (8 children)
Student loans... yet another way for banks to grant toxic loans during a downturn in economy. Looks there is something they keep forgetting:
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 1, Interesting) by Anonymous Coward on Thursday May 18 2017, @11:37PM (7 children)
Indeed. What's even more problematic is that the banks have no way of collecting on a defaulted student loan. If a home owner defaults on their mortgage the banks can at least foreclose on the property and get back some of their money. But what are they going to do if a college graduate defaults on their loan? It's not like they can demand that the (former) student hand over their diploma and use that to pay off creditors. So, how will the banks get themselves out of this one? Call on the government to rescue them yet again? What incentive can the banks offer to get Congress to go along with that? At least with the mortgage crisis the banks had some collateral in foreclosed properties to use as bargaining chips...but bad student debts? I don't see any good way out of this for the banks.
(Score: 2, Informative) by Anonymous Coward on Friday May 19 2017, @01:11AM (4 children)
You cannot discharge student loan debt. If you stop paying, that also means you'll have to stop gaining any income for the rest of your life. The banks offered bribes and Congress took them long ago against the theory that students would spend $$$ at college and then simply declare bankruptcy right after graduating. That wasn't happening, but the bank's money was able to convince the government that it was a major issue. Afterall, students are smart so they'll do whatever serves them best, ethics be damned as that's what they would do. Studies indicated otherwise, but when did those ever matter?
(Score: 1, Informative) by Anonymous Coward on Friday May 19 2017, @02:42AM (1 child)
This is what an empire in decline looks like:
Over the last decade, GDP is up $5.2T; the total credit market debt owed is up $24.5T [mybudget360.com]
(No publication date on the page; that appears to be May 2016.)
A country that manufactures less and less stuff is a country headed for oblivion.
[1] Financial, Insurance, Real Estate
-- OriginalOwner_ [soylentnews.org]
(Score: 2) by kaszz on Friday May 19 2017, @03:59AM
A country that produces fiat money that others may suddenly stop to put a value on sounds risky ;)
A system where real addition of value has gone is likely to, yes, decline.
(Score: 2) by kaszz on Friday May 19 2017, @04:01AM
Only incomes in the visible economy and only in that country. Many options.. :p
(Score: 0) by Anonymous Coward on Friday May 19 2017, @04:25PM
Indeed, you cannot. But have you ever heard the expression "you can't get blood from a stone"? This is going to put banks into a real bind. In order for the student to pay back the loan, they will need to have a job that pays well enough that they can earn a living and pay off their debt. Do you really think we are going to see debtors prisons come back into fashion? Or will the banks ask Congress for a bail out? As I mentioned before, with the mortgage crisis the banks had properties which they could hold as
collateralhostages. With the student loan crisis the banks can hold as collateral...what? They hold the debt but they don't have much leverage to collect. I suppose they could wring their hands at those deadbeat lazy ass students and insist really, really hard that they need to get a job and earn some money to pay off those loans. Ummm, yeah. Good luck with that.(Score: 2, Interesting) by Anonymous Coward on Friday May 19 2017, @02:35AM
Lifelong indentured service? Bring back the debt-prisons?
You think I joke, but don't be so certain about that...
I think we've seen the end of the second renaissance. Dark times are coming.
(Score: 1) by khallow on Friday May 19 2017, @11:18AM
What's even more problematic is that the banks have no way of collecting on a defaulted student loan.
Sure, they do. Get Uncle Sam to cover for it. Most of that junk is covered by federal loan guarantees. That's the real reason for making student loans impossible to discharge. These loans were huge liabilities to the federal budget.