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Friday, March 09, 2012

The debt that should not be

Student loan debt, which cannot be discharged in bankruptcy, is nearly twice as bad as previously reported:
The latest report by the Federal Reserve Bank of New York shows how dire the financial situation has become for college students with outstanding loans.

According to numbers released by the bank this week, 1 in 4 borrowers with outstanding student loans had a past-due balance in the third quarter of 2011. Those figures are higher than most previous estimates because, in its recent calculations, the New York Fed deliberately left out borrowers who are temporarily exempt from making payments, like those still in school or within the usual six-month period after graduation when they’re not required to make payments. By removing those borrowers from the equation, the percentage of past-due student loan balances sits at 27% of all outstanding student loans....

The estimated student loan balance in the third quarter last year was $870 billion, which increased 2.1% from the previous quarter and is more than both Americans’ total credit card balance ($693 billion) and auto loan balance ($730 billion). About $580 billion of the total is owed by Americans who are younger than 40.
That debt isn't going to be repaid, not when "almost half of student loan borrowers are either deferring their student loan payments or are in forbearance".

If you think the global economic contraction is over, you're not paying attention. The Fed and the other central banks are still fighting their desperate delaying game, but once more, the cracks are starting to show.

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