The student debt boom (cont.)

The Federal Reserve Bank of New York is out with it latest household debt report, covering the first quarter of 2015. Its parent in DC, the Federal Reserve Board, publishes lots of similar data, but the New York Fed is the first source to publish rigorous numbers on student debt. The latest report is here; you can get the numbers behind it here.

Since the official end of the Great Recession in June 2009, households have been borrowing very cautiously (how much it’s their decision, their lenders’ decision, or a combination of the two, isn’t fully clear). The glaring exception is student debt. Here are just a few numbers to make the point:

  • Overall household debt peaked in the third quarter of 2008. From that peak, it fell by 12% to a low in the second quarter of 2013 (not adjusted for inflation, like all these figures). But over the same almost-five-year period, student debt rose 63%. Take student debt out of the total, and household debt fell over the same period by 16%. Up 63% vs. down 16% is an enormous difference.
  • From that 2013Q2 low to the latest quarter available, 2015Q1, overall household debt is up by a little over 6%—or 5% if you take out student debt. But student debt is up almost 20%.
  • Since the New York Fed debt numbers began in the third quarter of 2006, nonstudent debt is unchanged: up (or down) exactly 0%. Student debt, however, is up 166%. It’s gone from 4% of total household debt outstanding to 10%.
  • Over the last year, nonstudent debt is up 1%; student debt, 7%. The rate of growth of student debt has slowed—from about 15% a year in 2008 to 7% now. But over the same period, the rate of growth of nonstudent debt has collapsed—from almost 9% to just over 1%. (For comparison, household income is now growing about 2–3% a year.)

There’s a lot of talk about how this rampant growth in student debt is a re-run of the subprime mortgage bubble. That’s not an exact comparison, since most of the debt is ultimately owed to or guaranteed by the federal government, so massive financial collapse is probably not an issue. It is, however, exacting a huge financial and psychological toll on the debtors, who would be having a hard enough time in a rotten economy without having to worry about spending hundreds of dollars a month paying off their education debt (at a time when the pundits counsel education as the only way to survive that rotten economy).

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