The Growing Student Loan Bubble



Mish’s Global Economic Trend AnalysisMike Shedlock notes:

As you can clearly see: mortgage debt, home equity debt, auto loans, credit cards, and other miscellaneous debt is all down since the start of the recession. Overall consumer debt is down 8.6% but student loans are up 74.6%. This is what happens when government purportedly attempts to find solutions to problems.
 
The result is education costs have increased unabated, and millions of students have been turned into debt-slaves for life in a game of Student Debt Lotto. The deleveraging of consumer debt is by definition deflationary, as is turning students into debt slaves.


In a recent report, Barclays’ analyst Cooper Howes concludes that defaulting student loans will cost taxpayers an estimated $300 billion through 2020. Howes wrote:

In Student loans: The dark side of “good” debt, 11 July 2012, we argued that the
Department of Education was underestimating the costs of federal student loan
programs by $225bn between now and 2020. We are raising that estimate to
$300bn. This is based on a new Kansas City Fed study that suggests that well
over half of all borrowers could have their payments capped under the income-based repayment program (IBR). In contrast, the Department of Education
expects that only 6% of repayment volume will be made under IBR in 2013.
 
Updated data confirm our earlier estimates and show that student debt held by
borrowers over 50 has been growing faster than other age groups. While debt held by older borrowers is at greater risk of not being paid off, much of this higher
growth is explained by an aging population and rise of PLUS and cosigned loans.
 
While the cost of attending college has skyrocketed, we find that the increase in
the 'sticker price' of college tuition has been accompanied by an increase in
financial aid. This explains why the average student loan burden has not changed
much in the past decade in real terms, and reflects educational institutions
seeking to capture more tuition from families who are willing and able to pay
more than most students.

Sources:
Mish’s Global Economic Trend Analysis
Mike Shedlock
December 6, 2012
 
Student Loans: An Educated Mess
Barclays
Cooper Howes
December 5, 2012