Friday, June 1, 2012

Zero Hedge - Student Debt Bubble Delinquencies Surge

Student Loan Debt is growing while the rest of the household sector is delevering...

But pressures from repayments and the debt overhang causing dropout rates to soar...

but even as the supposedly better-educated leave college, jobs are few and far between and delinquency rates are surging - even as every other form of household debt sees lower delinquency rates...

Read it at Zero Hedge
Student Debt Bubble Delinquencies Surge
By Tyler Durden

Overall consumer credit continues to fall due primarily to write downs in mortgage debt. Meanwhile, the remarkable growth in student loan debt continues unabated. The dropout rates at for-profit institutions are particularly troubling given that industry is heavily subsidized. Rising delinquency rates should also be watched closely.

Although these debts may cause economic trouble down the road, I don’t think it’s correct to call student loan debt a bubble. Mortgage debt was nearly $10 trillion at its peak, while student loan debt has yet to reach $1 trillion. Separately, a significant portion of the student debt is directly held by the government, reducing the need for any bailouts. The real trouble will stem from the fact that student debt cannot be written off through bankruptcy and may therefore act as a drag on consumer spending and home purchases for decades to come.

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