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Tuesday, December 11, 2012

The Student Loan Debt Bomb

Last week, the Federal Reserve Bank of New York reported that student loan debt increased to $956 billion, more than auto loan debt or credit card debt. More worrisome, the student loan 90-day delinquency rate increased to 11% this past quarter and for the first time exceeds the "serious delinquency" rate for credit card debt.

Student loan debt is reaching bubble-bursting levels. By comparison, in October 2007, the start of the subprime mortgage crisis, 16% of subprime mortgages were 90 days delinquent, according to Federal Reserve Chairman Ben Bernanke. By January 2008 it accelerated to 21%. If the economy heads off the fast-approaching fiscal cliff and tax rates spike for lower- and middle-class Americans, it may accelerate student loan defaults to crisis levels. The big banks got their taxpayer bailout; taxpayers may soon be on the hook for another.

Even if the markets manage to avoid another debt crisis, the mountain of student loan debt is already taking its toll on a weak economy.

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2 comments:

  1. How can loans be "Sub-Prime" when the lowest rate anyone has out there is higher than today's Prime Rate?

    Please explain this to me.

    Problem is not the loans.

    Problem is folks no longer have jobs to pay monthly on the loans.
    Problem is that the really want to stay current to protect their credit ratings, but there ARE NO JOBS.

    Problem is, people write crap like this and expect the masses to follow this herd... and most of the people do, until they get to me....

    ReplyDelete
  2. Problem is college cost too much

    ReplyDelete

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